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Washington, D.C. 20549
(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2008 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 13-4075851 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 Park Avenue, New York, N.Y. | 10166-0188 | |
(Address of principal executive offices) | (Zip Code) | |
(212) 578-2211 (Registrant’s telephone number, including area code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $0.01 | New York Stock Exchange | |
Floating Rate Non-Cumulative Preferred Stock, Series A, par value $0.01 | New York Stock Exchange | |
6.50% Non-Cumulative Preferred Stock, Series B, par value $0.01 | New York Stock Exchange | |
5.875% Senior Notes | New York Stock Exchange | |
5.375% Senior Notes | Irish Stock Exchange | |
5.25% Senior Notes | Irish Stock Exchange |
Large accelerated filerþ | Accelerated filero | |
Non-accelerated filero | Smaller reporting companyo | |
(Do not check if a smaller reporting company) |
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• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | |
• | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; | |
• | may apply standards of materiality in a way that is different from what may be viewed as material to investors; and | |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
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Item 1. | Business |
• | Build on widely recognized brand names | |
• | Capitalize on a large customer base | |
• | Enhance capital efficiency | |
• | Expand distribution channels | |
• | Continue to introduce innovative and competitive products | |
• | Focus on international operations | |
• | Maintain balanced focus on asset accumulation and protection products | |
• | Manage operating expenses commensurate with revenue growth | |
• | Further commit to a diverse workplace | |
• | Capitalize on retirement income needs |
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• | a modest increase (on a constant exchange rate basis) in premiums, fees and other revenues in 2009, with mixed results across MetLife’s segments, including (i) lower fee income from separate accounts businesses, including variable annuity and life products in the Individual segment; (ii) a possible decline in payroll-linked revenue from the Institutional segment’s group insurance customers; (iii) a reduction in the demand for certain retirement and savings products from the International and Institutional segments; and (iv) as a result of the impact of the recession on the housing market and the auto industry, a decrease in premiums from the Auto and Home segment; | |
• | continued downward pressure on net income across the enterprise, specifically net investment income, resulting from lower returns from other limited partnerships, real estate joint ventures and securities lending and ongoing uncertainty over the direction of interest rates, together with difficulty predicting the impact of the financial markets on net investment gains (losses) and unrealized investment gains (losses), as well as the effects of MetLife’s own credit, as it varies greatly and the exposure is not hedged; | |
• | the potential need to establish additional insurance-related liabilities, both those associated with guarantees (which are offset to some extent through hedging) and those not; and | |
• | the possible increase in certain expenses, including those associated with (i) the Company’s Operational Excellence initiative; (ii) impairments to goodwill, specifically in the Individual segment; (iii) the Company’s pension-related expense and (iv) DAC amortization. |
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• | For the Institutional segment and for the institutional business sold within the International segment, rates for group life and group non-medical and health products are based on anticipated results for the book of business being underwritten. Renewals are generally re-evaluated annually or biannually and are re-priced to reflect actual experience on such products. Retirement & savings type products are priced frequently and are very responsive to bond yields, and such prices include additional margin in periods of market uncertainty. This business is predominantly illiquid, because policyholders have no contractual rights to cash values and no options to change the form of the product’s benefits. | |
• | For the Individual segment and for individual business sold within the International segment, pricing of life insurance products is highly regulated and must be approved by the individual state regulators where the product is sold. Generally such products are renewed annually and may include pricing terms that are guaranteed for a certain period of time. Fixed and variable annuity products are also highly regulated and approved by the individual state regulators. Such products generally include penalties for early withdrawals and policyholder benefit elections to tailor the form of the product’s benefits to the needs of the opting policyholder. The Company periodically reevaluates the costs associated with such options and will periodically adjust pricing levels on its guarantees. Further, the Company from time to time may also reevaluate the type and level of guarantee features currently being offered. |
• | evaluating potential worksite marketing employer accounts and independent agencies; | |
• | establishing guidelines for the binding of risks; |
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• | reviewing coverage bound by agents; | |
• | underwriting potential insureds, on a case by case basis, presented by agents outside the scope of their binding authority; | |
• | pursuing information necessary in certain cases to enable Auto & Home to issue a policy within our guidelines; and | |
• | ensuring that renewal policies continue to be written at rates commensurate with risk. |
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Future policy benefit recoverables | $ | 8,258 | $ | 6,842 | ||||
Deposit recoverables | 2,258 | 2,616 | ||||||
Claim recoverables | 319 | 271 | ||||||
All other recoverables | 232 | 48 | ||||||
Total | $ | 11,067 | $ | 9,777 | ||||
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• | expanding the types of institutions that have access to the Federal Reserve Bank of New York’s discount window; | |
• | providing asset guarantees and emergency loans to particular distressed companies; | |
• | a temporary ban on short selling of shares of certain financial institutions (including, for a period, MetLife); | |
• | programs intended to reduce the volume of mortgage foreclosures by modifying the terms of mortgage loans for distressed borrowers; | |
• | temporarily guaranteeing money market funds; and | |
• | programs to support the mortgage-backed securities market and mortgage lending. |
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A.M. Best (1) | Fitch (2) | Moody’s (3) | S&P (4) | |||||||||||||
First MetLife Investors Insurance Company | A+ | N/R | N/R | AA− | ||||||||||||
General American Life Insurance Company | A+ | AA | Aa2 | AA− | ||||||||||||
MetLife Insurance Company of Connecticut | A+ | AA | Aa2 | AA− | ||||||||||||
MetLife Investors Insurance Company | A+ | AA | Aa2 | AA− | ||||||||||||
MetLife Investors USA Insurance Company | A+ | AA | Aa2 | AA− | ||||||||||||
Metropolitan Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Direct Property and Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan General Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Group Property & Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Life Insurance Company | A+ | AA | Aa2 | AA− | ||||||||||||
Metropolitan Lloyds Insurance Company of Texas | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Property and Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Tower Life Insurance Company | A+ | N/R | Aa3 | N/R | ||||||||||||
New England Life Insurance Company | A+ | AA | Aa2 | AA− | ||||||||||||
Texas Life Insurance Company | A- | N/R | N/R | N/R |
A.M. Best (1) | Fitch (2) | Moody’s (3) | S&P (4) | |||||||||||||
General American Life Insurance Company (Surplus Notes) | a | N/R | A1 | A | ||||||||||||
MetLife Capital Trust IV & X (Trust Securities) | bbb | A− | Baa1 | BBB | ||||||||||||
MetLife Funding, Inc. (Commercial Paper) | AMB-1+ | F1+ | P-1 | A-1+ | ||||||||||||
MetLife Short Term Funding LLC (Commercial Paper) | N/R | N/R | P-1 | A-1+ | ||||||||||||
MetLife, Inc. (Commercial Paper) | AMB-1 | F1 | P-1 | A-2 | ||||||||||||
MetLife, Inc. (Senior Unsecured Debt) | a− | A | A2 | A− | ||||||||||||
MetLife, Inc. (Subordinated Debt) | bbb+ | N/R | A3 | NR | ||||||||||||
MetLife, Inc. (Junior Subordinated Debt) | bbb | A− | Baa1 | BBB | ||||||||||||
MetLife, Inc. (Preferred Stock) | bbb | A− | Baa1 | BBB | ||||||||||||
MetLife, Inc. (Non-Cumulative Preferred Stock) | bbb | A− | Baa1 | BBB− | ||||||||||||
Metropolitan Life Insurance Company (Surplus Notes) | a | A+ | A1 | A | ||||||||||||
Metropolitan Life Global Funding I (Senior Secured Debt) | aa− | NR | Aa2 | AA− | ||||||||||||
MetLife Institutional Funding I, LLC (Senior Secured Debt) | aa− | NR | Aa2 | AA− |
(1) | A.M. Best financial strength ratings range from “A++ (superior)” to “S (Suspended).” Ratings of “A+” and “A” are in the “superior” and “excellent” categories, respectively. | |
A.M. Best’s long-term credit ratings range from “aaa (exceptional)” to “d (in default).” A “+” or “−” may be appended to ratings from “aa” to “ccc” to indicate relative position within a category. Ratings of “a” and “bbb” are in the “strong” and “adequate” categories. | ||
A.M. Best’s short-term credit ratings range from “AMB-1+ (strongest)” to “d (in default).” | ||
(2) | Fitch insurer financial strength ratings range from “AAA (exceptionally strong)” to “C (ceased or interrupted payments imminent).” A “+” or “−” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “AA” is in the “very strong” category. | |
Fitch long-term credit ratings range from “AAA (highest credit quality),” to “D (default).” A “+” or “−” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. Ratings of “A” and “BBB” are in the “strong” and “adequate” categories, respectively. |
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Fitch short-term credit ratings range from “F1+ (exceptionally strong credit quality)” to “D (in default).” A rating of “F1” is in the “highest credit quality” category. | ||
(3) | Moody’s insurance financial strength ratings range from “Aaa (exceptional)” to “C (extremely poor).” A numeric modifier may be appended to ratings from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. A rating of “Aa” is in the “excellent” category. Moody’s long-term credit ratings range from “Aaa (highest quality)” to “C (typically in default).” A numeric modifier may be appended to ratings from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. Ratings of “A” and “Baa” are in the “upper-medium grade” and “medium-grade” categories, respectively. | |
Moody’s short-term credit ratings range from“P-1 (superior)” to “NP (not prime).” | ||
(4) | S&P long-term insurer financial strength ratings range from “AAA (extremely strong)” to “R (under regulatory supervision).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “AA” is in the “very strong” category. | |
S&P long-term credit ratings range from “AAA (extremely strong)” to “D (payment default).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “A” is in the “strong” category. A rating of “BBB” has adequate protection parameters and is considered investment grade. | ||
S&P short-term credit ratings range from“A-1+ (extremely strong)” to “D (payment default).” A rating of“A-1” is in the “strong” category. | ||
N/R | indicates not rated. |
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Item 1A. | Risk Factors |
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• | Fixed maturity and equity securities are classified as available-for-sale, except for trading securities, and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income (loss), net of policyholder related amounts and deferred income taxes. | |
• | Trading securities are recorded at estimated fair value with subsequent changes in estimated fair value recognized in net investment income. | |
• | Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates estimated fair value. | |
• | The carrying value of mortgage and consumer loans is stated at original cost net of repayments, amortization of premiums, accretion of discounts and valuation allowances, except for residential mortgage loans held-for-sale accounted for under the fair value option which are carried at estimated fair value, as determined on a recurring basis and certain commercial and residential mortgage loans carried at the lower of cost or estimated fair value, as determined on a nonrecurring basis. | |
• | Policy loans are stated at unpaid principal balances. | |
• | Real estate held-for-investment, including related improvements, is stated at cost, less accumulated depreciation. | |
• | Real estate joint ventures and other limited partnership interests in which we have more than a minor equity interest or more than a minor influence over the joint ventures or partnership’s operations, but where we do not have a controlling interest and are not the primary beneficiary, are carried using the equity method of accounting. We use the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures or the partnership’s operations. | |
• | Other invested assets consist principally of freestanding derivatives with positive estimated fair values and leveraged leases. Freestanding derivatives are carried at estimated fair value with changes in estimated fair value reflected in income for both non-qualifying derivatives and derivatives in fair value hedging relationships. Derivatives in cash flow hedging relationships are reflected as a separate component of other comprehensive income (loss). Leveraged leases are recorded net of non-recourse debt. |
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Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. We define active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
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• | reducing new sales of insurance products, annuities and other investment products; | |
• | adversely affecting our relationships with our sales force and independent sales intermediaries; | |
• | materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; | |
• | requiring us to reduce prices for many of our products and services to remain competitive; and | |
• | adversely affecting our ability to obtain reinsurance at reasonable prices or at all. |
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• | licensing companies and agents to transact business; | |
• | calculating the value of assets to determine compliance with statutory requirements; | |
• | mandating certain insurance benefits; | |
• | regulating certain premium rates; | |
• | reviewing and approving policy forms; | |
• | regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; | |
• | regulating advertising; | |
• | protecting privacy; | |
• | establishing statutory capital and reserve requirements and solvency standards; | |
• | fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts; | |
• | approving changes in control of insurance companies; | |
• | restricting the payment of dividends and other transactions between affiliates; and | |
• | regulating the types, amounts and valuation of investments. |
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• | an election or removal of directors in which a stockholder has properly nominated one or more candidates in opposition to a nominee or nominees of MetLife, Inc.’s Board of Directors or a vote on a stockholder’s proposal to oppose a board nominee for director, remove a director for cause or fill a vacancy caused by the removal of a director by stockholders, subject to certain conditions; | |
• | a merger or consolidation, a sale, lease or exchange of all or substantially all of the assets, or a recapitalization or dissolution, of MetLife, Inc., in each case requiring a vote of stockholders under applicable Delaware law; | |
• | any transaction that would result in an exchange or conversion of shares of common stock held by the Trust for cash, securities or other property; and | |
• | any proposal requiring MetLife, Inc.’s Board of Directors to amend or redeem the rights under the stockholder rights plan, other than a proposal with respect to which we have received advice of nationally-recognized legal counsel to the effect that the proposal is not a proper subject for stockholder action under Delaware law. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions, except number of claims) | ||||||||||||
Asbestos personal injury claims at year end | 74,027 | 79,717 | 87,070 | |||||||||
Number of new claims during the year | 5,063 | 7,161 | 7,870 | |||||||||
Settlement payments during the year (1) | $ | 99.0 | $ | 28.2 | $ | 35.5 |
(1) | Settlement payments represent payments made by MLIC during the year in connection with settlements made in that year and in prior years. Amounts do not include MLIC’s attorneys’ fees and expenses and do not reflect amounts received from insurance carriers. |
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Item 4. | Submission of Matters to a Vote of Security Holders |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2008 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
Common Stock Price | ||||||||||||||||
High | $ | 61.52 | $ | 62.88 | $ | 63.00 | $ | 48.15 | ||||||||
Low | $ | 54.62 | $ | 52.77 | $ | 43.75 | $ | 16.48 |
2007 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
Common Stock Price | ||||||||||||||||
High | $ | 65.92 | $ | 69.04 | $ | 69.92 | $ | 70.87 | ||||||||
Low | $ | 59.10 | $ | 63.29 | $ | 59.62 | $ | 60.46 |
Dividend | ||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||||
(In millions, | ||||||||||||||
except per share data) | ||||||||||||||
October 28, 2008 | November 10, 2008 | December 15, 2008 | $ | 0.74 | $ | 592 | ||||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 |
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(c) Total Number | (d) Maximum Number | |||||||||||||||
of Shares | (or Approximate | |||||||||||||||
Purchased as Part | Dollar Value) of | |||||||||||||||
(a) Total Number | of Publicly | Shares that May Yet | ||||||||||||||
of Shares | (b) Average Price | Announced Plans | Be Purchased Under the | |||||||||||||
Period | Purchased (1) | Paid per Share | or Programs | Plans or Programs (2) | ||||||||||||
October 1- October 31, 2008 | 35,629 | $ | 34.02 | — | $ | 1,260,735,127 | ||||||||||
November 1- November 30, 2008 | 13,386 | $ | 30.76 | — | $ | 1,260,735,127 | ||||||||||
December 1- December 31, 2008 | 18,433 | $ | 35.01 | — | $ | 1,260,735,127 | ||||||||||
Total | 67,448 | $ | 33.64 | — | $ | 1,260,735,127 | ||||||||||
(1) | During the periods October 1 — October 31, 2008, November 1 — November 30, 2008 and December 1 — December 31, 2008, separate account affiliates of the Company purchased 35,629 shares, 13,386 shares and 18,433 shares, respectively, of common stock on the open market in nondiscretionary transactions to rebalance index funds. Except as disclosed above, there were no shares of common stock which were repurchased by the Company other than through a publicly announced plan or program. | |
(2) | In April 2008, the Company’s Board of Directors authorized an additional $1 billion common stock repurchase program, which will begin after the completion of the January 2008 $1 billion common stock repurchase program, of which $261 million remained outstanding at December 31, 2008. At December 31, 2008, the Company had $1,261 million remaining under its common stock repurchase program authorization. Under these authorizations, the Company may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements ofRule 10b5-1 under the Exchange Act) and in privately negotiated transactions. |
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Item 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Statement of Income Data (1) | ||||||||||||||||||||
Revenues (2), (3): | ||||||||||||||||||||
Premiums | $ | 25,914 | $ | 22,970 | $ | 22,052 | $ | 20,979 | $ | 18,842 | ||||||||||
Universal life and investment-type product policy fees | 5,381 | 5,238 | 4,711 | 3,775 | 2,819 | |||||||||||||||
Net investment income | 16,296 | 18,063 | 16,247 | 14,064 | 11,627 | |||||||||||||||
Other revenues | 1,586 | 1,465 | 1,301 | 1,221 | 1,152 | |||||||||||||||
Net investment gains (losses) | 1,812 | (578 | ) | (1,382 | ) | (112 | ) | 114 | ||||||||||||
Total revenues | 50,989 | 47,158 | 42,929 | 39,927 | 34,554 | |||||||||||||||
Expenses (2), (3): | ||||||||||||||||||||
Policyholder benefits and claims | 27,437 | 23,783 | 22,869 | 22,236 | 19,907 | |||||||||||||||
Interest credited to policyholder account balances | 4,787 | 5,461 | 4,899 | 3,650 | 2,766 | |||||||||||||||
Policyholder dividends | 1,751 | 1,723 | 1,698 | 1,678 | 1,664 | |||||||||||||||
Other expenses | 11,924 | 10,429 | 9,537 | 8,259 | 6,833 | |||||||||||||||
Total expenses | 45,899 | 41,396 | 39,003 | 35,823 | 31,170 | |||||||||||||||
Income from continuing operations before provision for income tax | 5,090 | 5,762 | 3,926 | 4,104 | 3,384 | |||||||||||||||
Provision for income tax (2) | 1,580 | 1,660 | 1,016 | 1,156 | 931 | |||||||||||||||
Income from continuing operations | 3,510 | 4,102 | 2,910 | 2,948 | 2,453 | |||||||||||||||
Income (loss) from discontinued operations, net of income tax (2) | (301 | ) | 215 | 3,383 | 1,766 | 391 | ||||||||||||||
Income before cumulative effect of a change in accounting, net of income tax | 3,209 | 4,317 | 6,293 | 4,714 | 2,844 | |||||||||||||||
Cumulative effect of a change in accounting, net of income tax (3) | — | — | — | — | (86 | ) | ||||||||||||||
Net income | 3,209 | 4,317 | 6,293 | 4,714 | 2,758 | |||||||||||||||
Preferred stock dividends | 125 | 137 | 134 | 63 | — | |||||||||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | $ | 4,651 | $ | 2,758 | ||||||||||
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December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Balance Sheet Data (1) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
General account assets | $ | 380,839 | $ | 399,007 | $ | 383,758 | $ | 354,857 | $ | 271,137 | ||||||||||
Separate account assets | 120,839 | 160,142 | 144,349 | 127,855 | 86,755 | |||||||||||||||
Total assets (2) | $ | 501,678 | $ | 559,149 | $ | 528,107 | $ | 482,712 | $ | 357,892 | ||||||||||
Liabilities: | ||||||||||||||||||||
Life and health policyholder liabilities (4) | $ | 286,019 | $ | 262,652 | $ | 253,284 | $ | 244,683 | $ | 182,443 | ||||||||||
Property and casualty policyholder liabilities (4) | 3,126 | 3,324 | 3,453 | 3,490 | 3,180 | |||||||||||||||
Short-term debt | 2,659 | 667 | 1,449 | 1,414 | 1,445 | |||||||||||||||
Long-term debt | 9,667 | 9,100 | 8,822 | 9,088 | 7,006 | |||||||||||||||
Collateral financing arrangements | 5,192 | 4,882 | — | — | — | |||||||||||||||
Junior subordinated debt securities | 3,758 | 4,075 | 3,381 | 2,134 | — | |||||||||||||||
Payables for collateral under securities loaned and other transactions | 31,059 | 44,136 | 45,846 | 34,515 | 28,678 | |||||||||||||||
Other | 15,625 | 34,992 | 33,725 | 30,432 | 25,561 | |||||||||||||||
Separate account liabilities | 120,839 | 160,142 | 144,349 | 127,855 | 86,755 | |||||||||||||||
Total liabilities (2) | 477,944 | 523,970 | 494,309 | 453,611 | 335,068 | |||||||||||||||
Stockholders’ Equity | ||||||||||||||||||||
Preferred stock, at par value | 1 | 1 | 1 | 1 | — | |||||||||||||||
Common stock, at par value | 8 | 8 | 8 | 8 | 8 | |||||||||||||||
Additional paid-in capital | 15,811 | 17,098 | 17,454 | 17,274 | 15,037 | |||||||||||||||
Retained earnings (5) | 22,403 | 19,884 | 16,574 | 10,865 | 6,608 | |||||||||||||||
Treasury stock, at cost | (236 | ) | (2,890 | ) | (1,357 | ) | (959 | ) | (1,785 | ) | ||||||||||
Accumulated other comprehensive income (loss) (6) | (14,253 | ) | 1,078 | 1,118 | 1,912 | 2,956 | ||||||||||||||
Total stockholders’ equity | 23,734 | 35,179 | 33,798 | 29,101 | 22,824 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 501,678 | $ | 559,149 | $ | 528,107 | $ | 482,712 | $ | 357,892 | ||||||||||
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Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
Other Data (1) | ||||||||||||||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | $ | 4,651 | $ | 2,758 | ||||||||||
Return on common equity (7) | 11.2% | 12.9% | 20.9% | 18.6% | 12.5% | |||||||||||||||
Return on common equity, excluding accumulated other comprehensive income (loss) | 9.1% | 13.3% | 22.1% | 20.7% | 14.4% | |||||||||||||||
EPS Data (1) | ||||||||||||||||||||
Income from Continuing Operations Available to Common Shareholders Per Common Share | ||||||||||||||||||||
Basic | $ | 4.60 | $ | 5.33 | $ | 3.65 | $ | 3.85 | $ | 3.26 | ||||||||||
Diluted | $ | 4.54 | $ | 5.20 | $ | 3.60 | $ | 3.82 | $ | 3.24 | ||||||||||
Income (Loss) from Discontinued Operations Per Common Share | ||||||||||||||||||||
Basic | $ | (0.41 | ) | $ | 0.29 | $ | 4.44 | $ | 2.36 | $ | 0.52 | |||||||||
Diluted | $ | (0.40 | ) | $ | 0.28 | $ | 4.39 | $ | 2.34 | $ | 0.52 | |||||||||
Cumulative Effect of a Change in Accounting Per Common Share (3) | ||||||||||||||||||||
Basic | $ | — | $ | — | $ | — | $ | — | $ | (0.11 | ) | |||||||||
Diluted | $ | — | $ | — | $ | — | $ | — | $ | (0.11 | ) | |||||||||
Net Income Available to Common Shareholders Per Common Share | ||||||||||||||||||||
Basic | $ | 4.19 | $ | 5.62 | $ | 8.09 | $ | 6.21 | $ | 3.67 | ||||||||||
Diluted | $ | 4.14 | $ | 5.48 | $ | 7.99 | $ | 6.16 | $ | 3.65 | ||||||||||
Dividends Declared Per Common Share | $ | 0.74 | $ | 0.74 | $ | 0.59 | $ | 0.52 | $ | 0.46 |
(1) | On July 1, 2005, the Company completed the acquisition of The Travelers Insurance Company, excluding certain assets, most significantly, Primerica, from Citigroup Inc. (“Citigroup”), and substantially all of Citigroup’s international insurance businesses. The 2005 selected financial data includes total revenues and total expenses of $966 million and $577 million, respectively, from the date of the acquisition. | |
(2) | Discontinued Operations: |
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Investment income | $ | 6 | $ | 21 | $ | 243 | $ | 405 | $ | 658 | ||||||||||
Investment expense | (3 | ) | (9 | ) | (151 | ) | (246 | ) | (392 | ) | ||||||||||
Net investment gains (losses) | 8 | 13 | 4,795 | 2,125 | 146 | |||||||||||||||
Total revenues | 11 | 25 | 4,887 | 2,284 | 412 | |||||||||||||||
Interest expense | — | — | — | — | 13 | |||||||||||||||
Provision for income tax | 4 | 11 | 1,725 | 812 | 140 | |||||||||||||||
Income from discontinued operations, net of income tax | $ | 7 | $ | 14 | $ | 3,162 | $ | 1,472 | $ | 259 | ||||||||||
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Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | $ | 4,086 | $ | 5,932 | $ | 5,467 | $ | 4,776 | $ | 4,492 | ||||||||||
Expenses | 3,915 | 5,640 | 5,179 | 4,609 | 4,286 | |||||||||||||||
Income before provision for income tax | 171 | 292 | 288 | 167 | 206 | |||||||||||||||
Provision for income tax | 57 | 101 | 99 | 60 | 74 | |||||||||||||||
Income from discontinued operations, net of income tax | 114 | 191 | 189 | 107 | 132 | |||||||||||||||
Gain (loss) on sale of subsidiaries, net of income tax | (422 | ) | 10 | 32 | 187 | — | ||||||||||||||
Income (loss) from discontinued operations, net of income tax | $ | (308 | ) | $ | 201 | $ | 221 | $ | 294 | $ | 132 | |||||||||
December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
General account assets | $ | 946 | $ | 22,866 | $ | 21,918 | $ | 20,150 | $ | 16,852 | ||||||||||
Separate account assets | — | 17 | 16 | 14 | 14 | |||||||||||||||
Total assets | $ | 946 | $ | 22,883 | $ | 21,934 | $ | 20,164 | $ | 16,866 | ||||||||||
Life and health policyholder liabilities (4) | 721 | 15,780 | 15,557 | 15,109 | 12,210 | |||||||||||||||
Debt | — | 528 | 307 | 401 | 425 | |||||||||||||||
Collateral financing arrangements | — | 850 | 850 | — | — | |||||||||||||||
Junior subordinated debt securities | — | 399 | 399 | 399 | — | |||||||||||||||
Shares subject to mandatory redemption | — | 159 | 159 | 159 | 158 | |||||||||||||||
Other | 27 | 2,945 | 2,676 | 2,195 | 2,179 | |||||||||||||||
Total liabilities | $ | 748 | $ | 20,661 | $ | 19,948 | $ | 18,263 | $ | 14,972 | ||||||||||
(3) | The cumulative effect of a change in accounting, net of income tax, of $86 million for the year ended December 31, 2004, resulted from the adoption ofSOP 03-1,Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Account(“SOP 03-1”). | |
(4) | Policyholder liabilities include future policy benefits, other policyholder funds and bank deposits. The life and health policyholder liabilities also include policyholder account balances, policyholder dividends payable and the policyholder dividend obligation. | |
(5) | The cumulative effect of changes in accounting principles, net of income tax, of $329 million, which decreased retained earnings at January 1, 2007, resulted from $292 million related to the adoption ofSOP 05-1,Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts,and $37 million related to the adoption of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109. The cumulative effect of changes in accounting principles, net of income tax, of $27 million, which increased retained earnings at January 1, 2008, resulted from the adoption of SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities(“SFAS 159”). |
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(6) | The cumulative effect of a change in accounting, net of income tax, of $744 million resulted from the adoption of SFAS No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,which decreased accumulated other comprehensive income (loss) at December 31, 2006. The cumulative effect of a change in accounting principle, net of income tax, of $10 million resulted from the adoption of SFAS 159, which decreased accumulated other comprehensive income (loss) at January 1, 2008. | |
(7) | Return on common equity is defined as net income available to common shareholders divided by average common stockholders’ equity. |
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• | Higher DAC amortization in the Individual segment related to lower expected future gross profits due to separate account balance decreases resulting from recent market declines, higher net investment gains primarily due to net derivative gains and the reduction on expected cumulative earnings of the closed block partially offset by a reduction in actual earnings of the closed block and changes in assumptions used to estimate future gross profits and margins. In addition, there is further offset in the Institutional segment due to a charge associated with the adoption ofSOP 05-1 in the prior year. | |
• | An increase in corporate expenses primarily related to an enterprise-wide cost reduction and revenue enhancement initiative. As a result of a strategic review begun in 2007, the Company launched an enterprise |
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initiative called Operational Excellence. This initiative began in April 2008 and management expects the initiative to be fully implemented by December 31, 2010. This initiative is focused on reducing complexity, leveraging scale, increasing productivity, improving the effectiveness of the Company’s operations and providing a foundation for future growth. The Company recognized within Corporate & Other during the current period an initial accrual for post-employment related expenses. |
• | Higher legal costs in Corporate & Other principally driven by costs associated with the commutation of three asbestos insurance policies and higher expenses in the Institutional and International segments as well as Corporate & Other associated with business growth and higher corporate support expenses. | |
• | Higher expenses in Corporate & Other relating to increased compensation, rent, and mortgage loan origination costs and servicing expenses associated with two acquisitions by MetLife Bank in 2008. |
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• | Lower fee income from separate account businesses, including variable annuity and life products in Individual Business. | |
• | A potential reduction in payroll linked revenue from Institutional group insurance customers. | |
• | A decline in demand for certain International and Institutional retirement & savings products. | |
• | A decrease in Auto & Home premiums resulting from a depressed housing market and auto industry. |
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• | 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. |
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• | 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. |
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(i) | the estimated fair value of investments in the absence of quoted market values; | |
(ii) | investment impairments; | |
(iii) | the recognition of income on certain investment entities; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(vi) | the estimated fair value of and accounting for derivatives; | |
(vii) | the capitalization and amortization of DAC and the establishment and amortization of VOBA; | |
(viii) | the measurement of goodwill and related impairment, if any; | |
(ix) | the liability for future policyholder benefits; | |
(x) | accounting for income taxes and the valuation of deferred tax assets; | |
(xi) | accounting for reinsurance transactions; | |
(xii) | accounting for employee benefit plans; and | |
(xiii) | the liability for litigation and regulatory matters. |
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Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. |
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(i) | the length of time and the extent to which the estimated fair value has been below cost or amortized cost; |
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(ii) | the potential for impairments of securities when the issuer is experiencing significant financial difficulties; | |
(iii) | the potential for impairments in an entire industry sector orsub-sector; | |
(iv) | the potential for impairments in certain economically depressed geographic locations; | |
(v) | the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; | |
(vi) | the Company’s ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost; | |
(vii) | unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and | |
(viii) | other subjective factors, including concentrations and information obtained from regulators and rating agencies. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Investment return | $ | 70 | $ | (34 | ) | $ | (50 | ) | ||||
Separate account balances | (708 | ) | 8 | 9 | ||||||||
Net investment gain (loss) related | (521 | ) | 126 | 233 | ||||||||
Expense | 61 | (53 | ) | 45 | ||||||||
In-force/Persistency | (159 | ) | 1 | (34 | ) | |||||||
Policyholder dividends and other | (30 | ) | (39 | ) | (7 | ) | ||||||
Total | $ | (1,287 | ) | $ | 9 | $ | 196 | |||||
• | The decrease in equity markets during the year significantly lowered separate account balances resulting in a significant reduction in expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in an increase of $708 million in DAC and VOBA amortization. | |
• | Changes in net investment gains (losses) resulted in the following changes in DAC and VOBA amortization: |
– | Actual gross profits decreased as a result of an increase in liabilities associated with guarantee obligations on variable annuities resulting in a reduction of DAC and VOBA amortization of $1,047 million. This decrease in actual gross profits was mitigated by freestanding derivative gains associated with the hedging of such guarantee obligations which resulted in an increase in actual gross profits and an increase in DAC and VOBA amortization of $625 million. | |
– | A change in valuation of guarantee liabilities, resulting from the adoption of SFAS 157 during 2008, also impacted the computation of actual gross profits and the related amortization of DAC and VOBA. The addition of risk margins increased the guarantee liability valuations, decreased actual gross profits and decreased amortization by $100 million. Offsetting this was the addition of own credit to the valuation of guarantee liabilities. Own credit decreased guarantee liability valuations, increased actual gross profits and increased amortization by $739 million. The inclusion of the Company’s own credit in the valuation of these guarantee liabilities’ increases the volatility of these valuations, the related DAC and VOBA amortization, and the net income of the Company. | |
– | As more extensively described in Note 9 of the Notes to the Consolidated Financial Statements, reductions in both actual and expected cumulative earnings of the closed block resulting from recent experience in the closed block combined with changes in expected dividend scales resulted in an increase in closed block DAC amortization of $195 million, $175 million of which is related to net investment gains (losses). | |
– | The remainder of the impact of net investment gains (losses) on DAC amortization of $129 million was attributable to numerous immaterial items. |
• | Increases in amortization in 2008 resulting from changes in assumptions related to in-force/persistency of $159 million were driven by higher than anticipated mortality and lower than anticipated premium persistency during the current year. |
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(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 25,914 | $ | 22,970 | $ | 22,052 | ||||||
Universal life and investment-type product policy fees | 5,381 | 5,238 | 4,711 | |||||||||
Net investment income | 16,296 | 18,063 | 16,247 | |||||||||
Other revenues | 1,586 | 1,465 | 1,301 | |||||||||
Net investment gains (losses) | 1,812 | (578 | ) | (1,382 | ) | |||||||
Total revenues | 50,989 | 47,158 | 42,929 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 27,437 | 23,783 | 22,869 | |||||||||
Interest credited to policyholder account balances | 4,787 | 5,461 | 4,899 | |||||||||
Policyholder dividends | 1,751 | 1,723 | 1,698 | |||||||||
Other expenses | 11,924 | 10,429 | 9,537 | |||||||||
Total expenses | 45,899 | 41,396 | 39,003 | |||||||||
Income from continuing operations before provision for income tax | 5,090 | 5,762 | 3,926 | |||||||||
Provision for income tax | 1,580 | 1,660 | 1,016 | |||||||||
Income from continuing operations | 3,510 | 4,102 | 2,910 | |||||||||
Income (loss) from discontinued operations, net of income tax | (301 | ) | 215 | 3,383 | ||||||||
Net income | 3,209 | 4,317 | 6,293 | |||||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | ||||||
Change | ||||
(In millions) | ||||
Institutional | $ | 423 | ||
Individual | (711 | ) | ||
International | (64 | ) | ||
Auto & Home | (161 | ) | ||
Corporate & Other | (79 | ) | ||
Total change, net of income tax | $ | (592 | ) | |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | 2,705 | 84 | % | ||||
Individual | (70 | ) | (2 | ) | ||||
International | 468 | 15 | ||||||
Auto & Home | — | — | ||||||
Corporate & Other | 105 | 3 | ||||||
Total change | $ | 3,208 | 100 | % | ||||
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$ Change | ||||
(In millions) | ||||
Institutional | $ | (31 | ) | |
Individual | 1,140 | |||
International | (78 | ) | ||
Auto & Home | (25 | ) | ||
Corporate & Other | 489 | |||
Total change | $ | 1,495 | ||
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | 317 | 26 | % | ||||
Individual | 99 | 8 | ||||||
International | 472 | 40 | ||||||
Auto & Home | 20 | 2 | ||||||
Corporate & Other | 284 | 24 | ||||||
Total change, net of income tax | $ | 1,192 | 100 | % | ||||
• | An increase in Argentina’s income from continuing operations primarily due to a net reduction of liabilities resulting from pension reform, a reduction in claim liabilities resulting from experience reviews in both 2007 and 2006 years, higher premiums resulting from higher pension contributions attributable to higher participant salaries, higher net investment income resulting from capital contributions in 2006, and a smaller increase in market indexed policyholder liabilities without a corresponding decrease in net investment income, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation, an increase in retention incentives related to pension reform, as well as lower trading portfolio income. Argentina also benefited, in both the current and prior years, from the utilization of tax loss carryforwards against which valuation allowances had been previously established. | |
• | Mexico’s income from continuing operations increased primarily due to a decrease in certain policyholder liabilities caused by a decrease in the unrealized investment results on invested assets supporting those liabilities relative to 2006, the favorable impact of experience refunds during the first quarter of 2007, a reduction in claim liabilities resulting from experience reviews and the adverse impact in 2006 of an adjustment for experience refunds in its institutional business, a year over year decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both 2006 and 2007, a decrease in liabilities based on a review of outstanding remittances, and growth in its institutional and universal life businesses. These increases in Mexico’s income from continuing operations were partially offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, the favorable impact in 2006 associated with a large group policy that was not renewed by the policyholder, a decrease in various one-time revenue items, |
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lower investment yields, the favorable impact in 2006 of liabilities related to employment matters that were reduced, and the benefit 2006 from the elimination of liabilities for pending claims that were determined to be invalid following a review. |
• | Taiwan’s income from continuing operations increased primarily driven by an increase due to higher DAC amortization in 2006 resulting from a loss recognition adjustment and restructuring costs, partially offset by the favorable impact of liability refinements in 2006, as well as higher policyholder liabilities related to loss recognition in 2006. | |
• | Brazil’s income from continuing operations increased due to the unfavorable impact of increases in policyholder liabilities due to higher than expected mortality on specific blocks of business and an increase in litigation liabilities in 2006, the unfavorable impact of the reversal of a tax credit in 2006 as well as growth of the in-force business. | |
• | Japan’s income from continuing operations increased due to improved hedge results and business growth, partially offset by the impact of foreign currency transaction losses. | |
• | Ireland’s income from continuing operations increased primarily due to the utilization of net operating losses for which a valuation allowance had been previously established, higher investment income, partially offset by higherstart-up expenses and currency transaction losses. | |
• | Hong Kong’s income from continuing operations increased due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. | |
• | Chile’s income from continuing operations increased primarily due to growth of the in-force business, higher joint venture income and higher returns on inflation indexed securities, partially offset by higher compensation, infrastructure and marketing expenses. | |
• | Income from continuing operations increased in the United Kingdom due to a reduction of claim liabilities resulting from an experience review, offset by an unearned premium calculation refinement. | |
• | Australia’s income from continuing operations increased due to changes in foreign currency exchange rates and business growth. | |
• | These increases in income from continuing operations were partially offset by a decrease in the home office due to higher economic capital charges and investment expenses, an increase in contingent tax expenses in 2007, as well as higher spending due to growth and initiatives, partially offset by the elimination of certain intercompany expenses previously charged to the International segment, and a tax benefit associated with a 2006 income tax expense related to a revision of an estimate. | |
• | India’s income from continuing operations decreased primarily due to headcount increases and growth initiatives, as well as the impact of valuation allowances established against losses in both years. | |
• | South Korea’s income from continuing operations decreased due to a favorable impact in 2006 associated with the implementation of a more refined reserve valuation system, as well as additional expenses in 2007 associated with growth and infrastructure initiatives, partially offset by continued growth and lower DAC amortization, both in the variable universal life business. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | 594 | 36 | % | ||||
Individual | 365 | 23 | ||||||
International | 560 | 35 | ||||||
Auto & Home | 63 | 4 | ||||||
Corporate & Other | 27 | 2 | ||||||
Total change | $ | 1,609 | 100 | % | ||||
• | An increase in Mexico’s premiums, fees and other revenues due to higher fees and growth in its institutional and universal life businesses, a decrease in experience refunds during the first quarter of 2007 on Mexico’s institutional business, as well as the adverse impact in 2006 of an adjustment for experience refunds on Mexico’s institutional business, offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits and various one-time revenue items which benefited both the current and prior years. | |
• | Premiums, fees and other revenues increased in Hong Kong primarily due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation as well as business growth. | |
• | Chile’s premiums, fees and other revenues increased primarily due to higher annuity sales, higher institutional premiums from its traditional and bank distribution channels, and the decrease in 2006 resulting from management’s decision not to match aggressive pricing in the marketplace. | |
• | South Korea’s premiums, fees and other revenues increased primarily due to higher fees from growth in its guaranteed annuity and variable universal life businesses. | |
• | Brazil’s premiums, fees and other revenues increased due to changes in foreign currency exchange rates and business growth. |
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• | Premiums, fees and other revenues increased in Japan due to an increase in reinsurance assumed. | |
• | Australia’s premiums, fees and other revenues increased primarily due to growth in the institutional and reinsurance business in-force, an increase in retention levels and changes in foreign currency exchange rates. | |
• | Argentina’s premiums, fees and other revenues increased due to higher pension contributions resulting from higher participant salaries and a higher salary threshold subject to fees and growth in bancassurance, offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation. | |
• | Taiwan’s and India’s premiums, fees and other revenues increased primarily due to business growth. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | 126 | 14 | % | ||||
Individual | 518 | 58 | ||||||
International | 218 | 25 | ||||||
Auto & Home | (17 | ) | (2 | ) | ||||
Corporate & Other | 47 | 5 | ||||||
Total change | $ | 892 | 100 | % | ||||
• | Argentina’s other expenses increased primarily due to a liability for servicing obligations that was established as a result of pension reform, an increase in commissions on bancassurance business, an increase in retention incentives related to pension reform, and the impact of management’s update of DAC assumptions as a result of pension reform and growth, partially offset by a lower increase in liabilities due to inflation and exchange rate indexing. |
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• | South Korea’s other expenses increased primarily due to the favorable impact in DAC amortization associated with the implementation of a more refined reserve valuation system in 2006, additional expenses associated with growth and infrastructure initiatives, as well as business growth and higher bank insurance fees, partially offset by a decrease in DAC amortization. | |
• | Mexico’s other expenses increased due to higher expenses related to business growth and the favorable impact in 2006 of liabilities that were reduced, offset by a decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both 2007 and 2006 and a decrease in liabilities based on a review of outstanding remittances. | |
• | Other expenses increased in India primarily due to headcount increases and growth initiatives, partially offset by the impact of management’s update of assumptions used to determine estimated gross profits. | |
• | Other expenses increased in Australia primarily due to business growth and changes in foreign currency exchange rates. | |
• | Other expenses increased in Chile primarily due to compensation costs, infrastructure and marketing programs, and growth partially offset by a decrease in DAC amortization related to inflation indexing. | |
• | Other expenses increased in Hong Kong due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Ireland’s other expenses increased due to higherstart-up costs, as well as foreign currency transaction losses. | |
• | Brazil’s other expenses increased due to changes in foreign currency exchange rates partially offset by an increase in litigation liabilities in 2006. | |
• | The United Kingdom’s other expenses increased due to changes in foreign currency exchange rates and higher spending on business initiatives partially offset by lower DAC amortization resulting from calculation refinements. | |
• | These increases in other expenses were partially offset by a decrease in Taiwan’s other expenses primarily due to a one-time increase in DAC amortization in 2006 due to a loss recognition adjustment resulting from low interest rates related to product guarantees coupled with high persistency rates on certain blocks of business, an increase in DAC amortization in 2006 associated with the implementation of a new valuation system, as well as one-time expenses in 2006 related to the termination of the agency force, and expense reductions recognized in 2007 due to the elimination of the agency force. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 14,964 | $ | 12,392 | $ | 11,867 | ||||||
Universal life and investment-type product policy fees | 886 | 802 | 775 | |||||||||
Net investment income | 7,535 | 8,176 | 7,260 | |||||||||
Other revenues | 775 | 726 | 684 | |||||||||
Net investment gains (losses) | 168 | (582 | ) | (630 | ) | |||||||
Total revenues | 24,328 | 21,514 | 19,956 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 16,525 | 13,805 | 13,368 | |||||||||
Interest credited to policyholder account balances | 2,581 | 3,094 | 2,593 | |||||||||
Policyholder dividends | — | — | — | |||||||||
Other expenses | 2,408 | 2,439 | 2,313 | |||||||||
Total expenses | 21,514 | 19,338 | 18,274 | |||||||||
Income from continuing operations before provision for income tax | 2,814 | 2,176 | 1,682 | |||||||||
Provision for income tax | 955 | 740 | 563 | |||||||||
Income from continuing operations | 1,859 | 1,436 | 1,119 | |||||||||
Income from discontinued operations, net of income tax | 3 | 13 | 48 | |||||||||
Net income | $ | 1,862 | $ | 1,449 | $ | 1,167 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 4,481 | $ | 4,481 | $ | 4,502 | ||||||
Universal life and investment-type product policy fees | 3,400 | 3,441 | 3,131 | |||||||||
Net investment income | 6,509 | 7,025 | 6,863 | |||||||||
Other revenues | 571 | 600 | 524 | |||||||||
Net investment gains (losses) | 665 | (112 | ) | (591 | ) | |||||||
Total revenues | 15,626 | 15,435 | 14,429 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 5,779 | 5,665 | 5,335 | |||||||||
Interest credited to policyholder account balances | 2,028 | 2,013 | 2,018 | |||||||||
Policyholder dividends | 1,739 | 1,715 | 1,696 | |||||||||
Other expenses | 5,143 | 4,003 | 3,485 | |||||||||
Total expenses | 14,689 | 13,396 | 12,534 | |||||||||
Income from continuing operations before provision for income tax | 937 | 2,039 | 1,895 | |||||||||
Provision for income tax | 307 | 698 | 653 | |||||||||
Income from continuing operations | 630 | 1,341 | 1,242 | |||||||||
Income (loss) from discontinued operations, net of income tax | (11 | ) | 16 | 22 | ||||||||
Net income | $ | 619 | $ | 1,357 | $ | 1,264 | ||||||
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• | Higher DAC amortization of $837 million, net of income tax, related to lower expected future gross profits due to separate account balance decreases resulting from recent market declines, higher net investment gains primarily due to net derivative gains and the reduction in expected cumulative earnings of the closed block partially offset by a reduction in actual earnings of the closed block and changes in assumptions used to estimate future gross profits and margins. | |
• | A decrease in interest margins of $318 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed a $279 million decrease to the deferred annuity business and a $39 million decrease to other investment-type products, both net of income tax. The decrease in interest margin was primarily attributable to a decline in net investment income due to lower returns on other limited partnership interests, real estate joint ventures, other invested assets including derivatives, and short term investments, all of which were partially offset by higher securities lending results. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move in a manner similar to market interest rate movements, subject to any minimum guarantees and, therefore, generally does not, but it may introduce volatility in expense. | |
• | Unfavorable underwriting results in life products of $68 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from year to year. | |
• | An increase in interest credited to policyholder account balances of $39 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. | |
• | Higher annuity benefits of $29 million, net of income tax, primarily due to higher guaranteed annuity benefit costs net of related hedging results and higher amortization of sales inducements, partially offset by revisions to policyholder benefits in both years. | |
• | Lower universal life and investment-type product policy fees combined with other revenues of $22 million, net of income tax, primarily resulting from lower average separate account balances due to unfavorable equity market performance during the current year, as well as revisions to management’s assumptions used to determine estimated gross profits and margins. These decreases were partially offset by universal life business growth over the prior year. | |
• | An increase in policyholder dividends of $16 million, net of income tax, due to growth in the business. |
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• | Lower expenses of $96 million, net of income tax, primarily due to a decrease in non-deferrable volume related expenses and a write-off of a receivable from one of the Company’s joint venture partners in the prior year, partially offset by the impact of revisions to certain pension and post retirement liabilities in the current year. | |
• | Higher net investment income on blocks of business not driven by interest margins of $12 million, net of income tax. |
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• | Higher DAC amortization of $205 million, net of income tax, primarily resulting from business growth, lower net investment losses in 2007 and revisions to management’s assumptions used to determine estimated gross profits and margins. | |
• | Unfavorable underwriting results in life products of $151 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from year to year. | |
• | Higher expenses of $132 million, net of income tax. Higher general expenses, the impact of revisions to certain liabilities in both years, and the write-off of a receivable from one of the Company’s joint venture partners contributed to the increase in other expenses. | |
• | An increase in the closed block-related policyholder dividend obligation of $75 million, net of income tax, which was driven by net investment gains. | |
• | Higher annuity benefits of $24 million, net of income tax, primarily due to higher amortization of deferred costs, partially offset by lower costs of guaranteed annuity benefit riders and related hedging. | |
• | An increase in policyholder dividends of $12 million, net of income tax, due to growth in the business. | |
• | An increase in interest credited to policyholder account balances of $13 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. |
• | Higher fee income from separate account products of $276 million, net of income tax, primarily related to fees being earned on a higher average account balance resulting from a combination of growth in the business and overall market performance. |
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• | Higher net investment income on blocks of business not driven by interest margins of $99 million, net of income tax, due to an increase in yields and growth in the average asset base. | |
• | An increase in interest margins of $18 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed a $1 million decrease to the deferred annuity business offset by a $19 million increase to other investment-type products, both net of income tax. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move in a manner similar to market interest rate movements, and may reflect actions by management to respond to competitive pressures and, therefore, generally does not, but it may, introduce volatility in expense. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 3,470 | $ | 3,096 | $ | 2,722 | ||||||
Universal life and investment-type product policy fees | 1,095 | 995 | 805 | |||||||||
Net investment income | 1,249 | 1,247 | 949 | |||||||||
Other revenues | 18 | 24 | 28 | |||||||||
Net investment gains (losses) | 167 | 56 | (10 | ) | ||||||||
Total revenues | 5,999 | 5,418 | 4,494 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 3,166 | 2,460 | 2,411 | |||||||||
Interest credited to policyholder account balances | 171 | 354 | 288 | |||||||||
Policyholder dividends | 7 | 4 | (3 | ) | ||||||||
Other expenses | 1,671 | 1,749 | 1,531 | |||||||||
Total expenses | 5,015 | 4,567 | 4,227 | |||||||||
Income from continuing operations before provision for income tax | 984 | 851 | 267 | |||||||||
Provision for income tax | 404 | 207 | 95 | |||||||||
Income from continuing operations | 580 | 644 | 172 | |||||||||
Income (loss) from discontinued operations, net of income tax | — | (9 | ) | 28 | ||||||||
Net income | $ | 580 | $ | 635 | $ | 200 | ||||||
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• | Argentina by $65 million, net of income tax primarily due to the negative impact the 2007 Argentine pension reform had on the 2008 income from continuing operations. These losses were partially offset by the net impact resulting from the Argentine nationalization of the private pension system “Nationalization” as well as refinements to certain contingent and insurance liabilities associated with a Supreme Court ruling. In 2007, pension reform legislation eliminated the obligation to provide death and disability coverage by the plan administrators effective January 1, 2008 which created significant one time gains in the prior year resulting from the release of death and disability reserves. In addition, the impact of the 2007 pension reform resulted in a decrease in premiums for the full year of 2008 partially offset by a decrease in claims and market-indexed policyholder liabilities. In December 2008, the Argentine government nationalized the private pension system and seized the underlying investments. With this action the Company’s pension business in Argentina ceased to exist. As a result, the Company eliminated certain assets which included deferred acquisition costs and deferred tax assets, certain liabilities which included primarily the liability for future servicing obligations and incurred severance costs associated with the termination of employees. The liability for future servicing obligations was established due to the 2007 pension reform which resulted in the Company managing significant pension assets for which the Company would no longer receive any compensation. The elimination of this liability more than offset the elimination of assets and the incurred severance costs related to the Nationalization. In addition to the impact of pension reform and Nationalization, Argentina’s income from continuing operations was also favorably impacted by changes in contingent liabilities and the associated future policyholder benefits for Supreme Court case decisions related to the pesification of insurance contracts by the government in 2002. Other developments include the reduction of claim liabilities in the prior year from an experience review and the favorable impact in the current year of higher inflation rates on indexed securities partially offset by higher losses on the trading securities portfolio. Argentina’s results were impacted, in both the current and prior years, by valuation allowances against deferred taxes that are released only upon actual payment of taxes. | |
• | Japan by $53 million, net of income tax, due to a decrease of $146 million, net of income tax, in the Company’s earnings from its investment in Japan due to an increase in losses on embedded derivatives associated with variable annuity riders, an increase in DAC amortization related to market performance and the impact of a refinement in assumptions for the guaranteed annuity business partially offset by the |
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favorable impact from the utilization of the fair value option for certain fixed annuities, as well as a decrease of $14 million, net of income tax in earnings from assumed reinsurance, and an increase of $108 million, net of income tax, from hedging activities associated with Japan’s guaranteed annuity benefits. |
• | The home office by $7 million, net of income tax, primarily due to higher economic capital charges and lower expenses in the prior year resulting from the elimination of intercompany expenses previously charged to the International segment partially offset by a decrease in accrued tax liabilities. | |
• | Mexico by $4 million, net of income tax, primarily due to higher claims experience, an increase in certain policyholder liabilities caused by lower unrealized investment losses on the invested assets supporting those liabilities relative to the prior year, the favorable impact in the prior year of a decrease in experience refunds on Mexico’s institutional business, a lower increase in litigation liabilities in the prior year, higher expenses related to business growth and infrastructure costs, as well as a valuation allowance established against net operating losses, partially offset by the reinstatement of premiums from prior years, growth in the individual and institutional businesses, higher net investment income due to an increase in invested assets as well as the impact of higher inflation rates on indexed securities, lower DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years, and a decrease in liabilities based on a review of outstanding remittances. | |
• | Chile by $3 million, net of income tax, primarily due to higher spending on growth initiatives, as well as higher commissions and compensation expenses due to business growth partially offset by higher joint venture income. |
• | Hong Kong by $18 million, net of income tax, due to the acquisition of the remaining 50% interest in MetLife Fubon in the second quarter of 2007 and the resulting consolidation of the operation beginning in the third quarter of 2007. | |
• | Ireland by $5 million, net of income tax, due to foreign currency transaction losses in the prior year and foreign currency transaction gains in the current year as well as higher net investment income due to an increase in invested assets, partially offset by higher expenses related to growth initiatives and the utilization in the prior year of net operating losses for which a valuation allowance had been previously established. | |
• | Brazil by $4 million, net of income tax, primarily due to business growth offset by a decrease in claims liabilities in the prior year from an experience review and higher claim experience in the current year. | |
• | Taiwan by $4 million, net of income tax, primarily due to an increase in invested assets and a refinement in DAC capitalization as well as business growth partially offset by the impact in both the current and prior years from refinements of methodologies related to the estimation of profit emergence on certain blocks of business. | |
• | South Korea by $3 million, net of income tax, primarily due to higher revenues from business growth and higher investment yields, a reduction in claim liabilities from a refinement in methodology, as well as a refinement in DAC capitalization, partially offset by higher claims and operating expenses, including an increase in DAC amortization related to market performance. | |
• | Australia by $3 million, net of income tax, primarily due to business growth slightly offset by an increase in claim liabilities based on a review of experience. | |
• | The United Kingdom by $2 million, net of income tax, primarily due to business growth. |
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• | Chile by $150 million primarily due to higher annuity sales as well as higher institutional premiums from its traditional and bank distribution channels. | |
• | Mexico by $120 million due to growth in its individual and institutional businesses as well as the reinstatement of $8 million of premiums from prior years partially offset by a decrease of $13 million in experience refunds in the prior year on Mexico’s institutional business and a decrease in fees due to management’s update of assumptions used to determine estimated gross profits in both the current and prior years. | |
• | Hong Kong by $77 million primarily due to the acquisition of the remaining 50% interest in MetLife Fubon in the second quarter of 2007 and the resulting consolidation of the operation beginning in the third quarter of 2007 slightly offset by lower business growth. | |
• | The United Kingdom by $68 million primarily due to growth in the reinsurance business as well as the prior year impact of an unearned premium calculation refinement. | |
• | South Korea by $68 million due to growth in its guaranteed annuity and variable universal life businesses as well as in its traditional business. | |
• | Australia by $54 million as a result of growth in the institutional business and an increase in retention levels. | |
• | India, Brazil, Belgium, and Taiwan by $34 million, $28 million, $12 million and $3 million, respectively, due to business growth. | |
• | The Company’s Japan operations by $17 million due to an increase in fees from assumed reinsurance. |
• | Chile by $93 million due to the impact of higher inflation rates on indexed securities, the valuations and returns of which are linked to inflation rates, an increase in invested assets, as well as higher joint venture income. | |
• | Mexico by $75 million due to an increase in invested assets, the impact of higher inflation rates on indexed securities, higher short-term yields as well as the lengthening of the duration of the portfolio. | |
• | Japan by $20 million due to an increase of $166 million from hedging activities associated with Japan’s guaranteed annuity business partially offset by a decrease of $146 million, net of income tax, in the Company’s earnings from its investment in Japan due to an increase in losses on embedded derivatives associated with variable annuity riders and the impact of a refinement in assumptions for the guaranteed |
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annuity business partially offset by the favorable impact from the utilization of the fair value option for certain fixed annuities. |
• | South Korea and Taiwan by $19 million and $9 million, respectively, due to increases in invested assets as well as higher portfolio yields. | |
• | Argentina by $6 million primarily due to the impact of higher inflation rates on indexed securities partially offset by higher losses on the trading securities portfolio. | |
• | India by $5 million primarily due to increases in invested assets. |
• | Hong Kong by $160 million despite the acquisition of the remaining 50% interest in MetLife Fubon in the second quarter of 2007 and the resulting consolidation of the operation beginning in the third quarter of 2007, because of the negative investment income for the year due to the losses on the trading securities portfolio which supports unit-linked policyholder liabilities. | |
• | The home office of $24 million primarily due to an increase in the amount charged for economic capital. | |
• | Ireland by $21 million primarily due to losses in the current year on the trading securities portfolio which supports unit-linked policyholder liabilities, partially offset by an increase due to higher invested assets resulting from capital contributions in the prior year. |
• | Chile by $236 million primarily due to an increase in the annuity and institutional businesses mentioned above, as well as an increase in inflation indexed policyholder liabilities. | |
• | Mexico by $182 million primarily due to increases in liabilities and other policyholder benefits commensurate with the growth in premiums discussed above, an increase in certain policyholder liabilities caused by lower unrealized investment losses on the invested assets supporting those liabilities relative to the prior year, and an increase in interest credited to policyholder account balances commensurate with the growth in investment income from inflation-indexed assets discussed above. | |
• | Argentina by $158 million primarily due to the prior year impact of a release of death and disability liabilities associated with the pension reform discussed above, a reduction of claim liabilities in the prior year from an experience review as well as growth in the institutional and bancassurance business, offset by a decrease in claims and market-indexed policyholder liabilities resulting from pension reform, which eliminated the obligation of plan administrators to provide death and disability coverage effective January 1, 2008. | |
• | The Company’s Japan operations by $39 million due to an increase in guarantee reserves from assumed reinsurance. |
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• | Australia by $38 million due to growth in the institutional business and an increase in retention levels as well as an increase in claim liabilities based on a review of experience. | |
• | South Korea by $31 million primarily due to higher claim experience and business growth offset by a reduction in claim liabilities due to a refinement in methodology. | |
• | The United Kingdom by $16 million due to the reduction in claim liabilities in the prior year based on a review of experience as well as higher claims in the current year and business growth. | |
• | India by $13 million due to business growth. | |
• | Brazil by $12 million due to a decrease in claims liabilities in the prior year from an experience review, higher claim experience in the current year and business growth offset by a decrease in interest credited to unit-linked policyholder liabilities reflecting net losses in the trading portfolio. |
• | Hong Kong by $113 million due to the acquisition of the remaining 50% interest in MetLife Fubon in the second quarter of 2007 and the resulting consolidation of the operation beginning in the third quarter of 2007, which includes a decrease in interest credited as a result of a reduction in unit-linked policyholder liabilities reflecting the losses of the trading portfolio backing these liabilities as discussed in the net investment income section above. | |
• | Ireland by $22 million primarily due to a decrease in interest credited as a result of a reduction in unit-linked policyholder liabilities reflecting the losses of the trading portfolio backing these liabilities. |
• | Argentina by $230 million, primarily due to the establishment in the prior year of a liability for pension servicing obligations due to pension reform, the elimination of the liability for pension servicing obligations and the elimination of DAC for the pension business in the current year as a result of Nationalization, as well as the elimination of contingent liabilities for certain cases due to recent Supreme Court decisions related to the pesification of insurance contracts by the government in 2002. Partially offsetting these decreases is an increase in severance costs related to Nationalization, as well as higher commissions from growth in the institutional and bancassurance business. | |
• | Ireland by $12 million due to foreign currency transaction losses in the prior year and foreign currency transaction gains in the current year, partially offset by higher expenses related to growth initiatives. |
• | South Korea by $50 million due to an increase in DAC amortization related to market performance as well as higher spending on advertising and marketing offset by a refinement in DAC capitalization. | |
• | The United Kingdom by $50 million due to business growth as well as lower DAC amortization in the prior year resulting from calculation refinements, partially offset by foreign currency transaction gains. | |
• | India by $28 million primarily due to increased staffing and growth initiatives. | |
• | The home office by $12 million primarily due to lower expenses in the prior year resulting from the elimination of intercompany expenses previously charged to the International segment, as well as higher spending on growth and infrastructure initiatives, partially offset by a decrease in accrued interest on tax liabilities. |
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• | Chile by $12 million primarily due to the business growth discussed above as well as higher commissions and compensation costs and higher spending on infrastructure and marketing programs. | |
• | Mexico by $11 million primarily due to higher expenses related to business growth and infrastructure costs, a lower increase in litigation liabilities in the prior year as well as changes in liabilities based on a review of outstanding remittances in both the current and prior years, partially offset by lower DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years. | |
• | Hong Kong by $11 million due to the acquisition of the remaining 50% interest in MetLife Fubon in the second quarter of 2007 and the resulting consolidation of the operation beginning in the third quarter of 2007. | |
• | Brazil, Belgium and Australia, each increased by $11 million, and Poland by $7 million primarily due to higher commissions related to business growth. | |
• | Taiwan by $5 million due to a refinement in DAC resulting from a refinement of methodologies related to the estimation of profit emergence on certain blocks of business as well as growth. |
• | Argentina by $146 million, net of income tax, primarily due to a net reduction of liabilities by $48 million, net of income tax, resulting from pension reform. Additionally, $66 million of a valuation allowance related to a deferred tax asset established in connection with such pension reform liabilities was reduced, resulting in a commensurate increase in income from continuing operations. Under the reform plan, fund administrators are no longer liable for death and disability claims of the plan participants; however, administrators retain the obligation for administering certain existing and future participants’ accounts for which they receive no revenue. Also contributing is the favorable impact of reductions in claim liabilities resulting from experience reviews in both years, higher premiums primarily due to higher pension contributions attributable to higher participant salaries, higher net investment income resulting from capital contributions in 2006, and a smaller increase in market indexed policyholder liabilities without a corresponding decrease in net investment income, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation, an increase in retention incentives related to pension reform, as well as lower trading portfolio income. Argentina also benefited, in both years, from the utilization of tax loss carryforwards against which valuation allowances had previously been established, and in 2007 from the reduction of valuation allowances due to expected realizability of deferred tax assets. | |
• | Mexico by $139 million, net of income tax, primarily due to a decrease in certain policyholder liabilities caused by a decrease in the unrealized investment results on invested assets supporting those liabilities relative to 2006, the favorable impact of experience refunds during the first quarter of 2007 in its institutional business, a reduction in claim liabilities resulting from experience reviews, the adverse impact in 2006 of an adjustment for experience refunds in its institutional business, a year over year decrease in DAC amortization as a result of management’s update of assumptions used to determine estimated gross profits in both years, a decrease in liabilities based on a review of outstanding remittances, as well as growth in its institutional and universal life businesses. These increases were offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, the favorable impact in 2006 associated with a large group policy that was not renewed by the policyholder, a decrease in various |
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one-time revenue items, lower investment yields, the favorable impact in 2006 of liabilities related to employment matters that were reduced, and the benefit in 2006 from the elimination of liabilities for pending claims that were determined to be invalid following a review. |
• | Taiwan by $51 million, net of income tax, primarily due to an increase in DAC amortization in 2006 due to a loss recognition adjustment and prior year restructuring costs of $11 million associated with the termination of the agency distribution channel, partially offset by the favorable impact of liability refinements in 2006 and higher policyholder liabilities related to loss recognition in 2006. | |
• | Brazil by $37 million, net of income tax, due to the unfavorable impact of increases in policyholder liabilities due to higher than expected mortality on specific blocks of business in 2006, an increase in litigation liabilities in 2006 and the unfavorable impact of the reversal of a tax credit in 2006, as well as growth of the in-force business. | |
• | Ireland by $19 million, net of income tax, primarily due to the utilization of net operating losses for which a valuation allowance had been previously established as well as higher investment income resulting from higher invested assets from a capital contribution, partially offset by higherstart-up expenses and currency transaction losses. | |
• | Japan by $22 million, net of income tax, due to improved hedge results and business growth, partially offset by the impact of foreign currency transaction losses. | |
• | Hong Kong by $9 million, net of income tax, due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. | |
• | Chile by $8 million, net of income tax, primarily due to continued growth of the in-force business, higher joint venture income and higher returns on inflation indexed securities, partially offset by higher compensation, infrastructure and marketing expenses. | |
• | The United Kingdom by $3 million, net of income tax, due to a reduction of claim liabilities resulting from an experience review, offset by an unearned premium calculation refinement. | |
• | Australia by $1 million, net of income tax, due to changes in foreign currency exchange rates offset by higher claims and business growth. |
• | The home office by $9 million, net of income tax, due to higher economic capital charges and investment expenses of $16 million, net of income tax, a $3 million increase in contingent tax expenses in 2007, as well as higher spending on growth and initiatives, partially offset by the elimination of certain intercompany expenses previously charged to the International segment and a tax benefit associated with a prior year income tax expense of $7 million related to a revision of an estimate. | |
• | India by $3 million, net of income tax, primarily due to headcount increases and growth initiatives, as well as the impact of valuation allowances established against losses in both years. | |
• | South Korea by $4 million, net of income tax, due to a favorable impact in 2006 of $38 million, net of income tax, in DAC amortization associated with the implementation of a more refined reserve valuation system, as well as additional expenses in 2007 associated with growth and infrastructure initiatives, partially offset by continued growth in its variable universal life business, lower DAC amortization in the variable universal life business due to favorable market performance and a lower increase in claim liabilities. |
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• | Mexico by $133 million primarily due to higher fees and growth in its institutional and universal life businesses, a decrease of $13 million in experience refunds during the first quarter of 2007 on Mexico’s institutional business, as well as the adverse impact in 2006 of an adjustment for experience refunds on Mexico’s institutional business. These increases were offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, and various one-time revenue items for which 2006 benefited by $16 million and 2007 benefited by $4 million. | |
• | Hong Kong by $98 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. | |
• | Chile by $94 million primarily due to higher annuity sales resulting from a higher interest rate environment, improved competitive conditions and an expected rate increase in 2008, higher institutional premiums from its traditional and bank distribution channels, as well as the decrease in 2006 resulting from management’s decision not to match aggressive pricing in the marketplace. | |
• | South Korea by $90 million primarily due to higher fees from growth in its guaranteed annuity business and variable universal life business. | |
• | Brazil by $35 million primarily due to changes in foreign currency exchange rates and business growth. | |
• | The Company’s Japan operation by $31 million due to an increase in reinsurance assumed. | |
• | Australia by $26 million as a result of growth in the institutional and reinsurance in-force business, an increase in retention levels and changes in the foreign currency exchange rates. | |
• | Argentina by $21 million primarily due to an increase in premiums and fees from higher pension contributions resulting from higher participant salaries and a higher salary threshold subject to fees and growth in bancassurance, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation. | |
• | Taiwan and India by $21 million and $11 million, respectively, primarily due to business growth. |
• | The United Kingdom by $3 million due to an unearned premium calculation refinement partially offset by changes in foreign currency rates. |
• | Chile by $148 million due to the impact of higher inflation rates on indexed securities, the valuations and returns of which are linked to inflation rates, higher joint venture income, as well as an increase in invested assets. | |
• | Mexico by $46 million due to an increase in invested assets, partially offset by a decrease in yields, exclusive of inflation. | |
• | Hong Kong by $43 million primarily due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Japan by $19 million due to an increase of $52 million from hedging activities associated with Japan’s guaranteed annuity, offset by a decrease of $33 million, net of income tax, in the Company’s investment in |
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Japan primarily due to an increase in the costs of guaranteed annuity benefits and the impact of foreign currency transaction losses, partially offset by business growth. |
• | South Korea and Taiwan by $24 million and $6 million, respectively, primarily due to increases in invested assets. | |
• | Brazil by $14 million primarily due to increases in invested assets as well as changes in foreign currency exchange rates. | |
• | Australia by $12 million due to changes in foreign currency exchange rates, higher yields and increases in invested assets. | |
• | Ireland by $9 million due to an increase in invested assets resulting from capital contributions. | |
• | India by $4 million due to an increase in invested assets, as well as higher yields. |
• | The home office of $25 million primarily due to an increase in the amount charged for economic capital and investment management expenses. | |
• | Argentina by $7 million primarily due to unfavorable results in the trading portfolio, partially offset by higher invested assets resulting from capital contributions in 2006. Additionally, net investment income in 2006 did not decrease correspondingly with the decrease in policyholder benefits and claims discussed below because 2006 did not include interest- and inflation-indexed assets to support such liabilities. |
• | Chile by $221 million primarily due to an increase in inflation indexed policyholder liabilities as well as growth in its annuity and institutional businesses. | |
• | Hong Kong by $119 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Taiwan by $65 million primarily due to a decrease of $14 million in 2006 from liability refinements associated with the conversion to a new valuation system, as well as higher policyholder liabilities related to loss recognition in the fourth quarter of 2006 and growth in the business. | |
• | South Korea by $27 million primarily due to business growth as well as changes in foreign currency exchange rates, partially offset by a lower increase in claims liabilities resulting from a change in the reinsurance allowance in 2006. | |
• | Australia by $23 million due to higher claims, an increase in retention levels, business growth and changes in foreign currency exchange rates. |
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• | India by $4 million due to higher claims and business growth, partially offset by management’s update of assumptions used to determine estimated gross profits. |
• | Argentina by $250 million primarily due to the elimination of liabilities for claims and premium deficiencies of $208 million resulting from pension reform. Under the reform plan, which is effective January 1, 2008, fund administrators are no longer liable for new death and disability claims of the plan participants. Also contributing is a decrease in interest- and market-indexed policyholder liabilities and the favorable impact of reductions in claim liabilities resulting from experience reviews in both the current and prior years. | |
• | Mexico by $63 million, primarily due to a decrease in certain policyholder liabilities of $117 million caused by a decrease in the unrealized investment results on the invested assets supporting those liabilities relative to 2006 and a reduction in claim liabilities resulting from experience reviews, offset by an increase of $10 million due to a decrease in 2006 of policyholder benefits associated with a large group policy that was not renewed by the policyholder, an increase of $6 million due to a benefit in 2006 from the elimination of liabilities for pending claims that were determined to be invalid following a review, as well as business growth. | |
• | Brazil of $13 million primarily due to the impact in 2006 of increases in policyholder liabilities from higher than expected mortality on specific blocks of business, partially offset by changes in foreign currency exchange rates. | |
• | The United Kingdom by $8 million, due to a reduction of claim liabilities based on a review of experience. |
• | Argentina by $153 million, primarily due to a liability of $128 million for servicing obligations that was established as a result of pension reform. Under the reform plan, which is effective January 1, 2008, the Company retains the obligation for administering certain existing and future participants’ accounts for which they receive no revenue. Also contributing is an increase in commissions on bancassurance business, an increase in retention incentives related to pension reform, the impact of management’s update of DAC assumptions as a result of pension reform and growth, partially offset by a lower increase in liabilities due to inflation and exchange rate indexing. | |
• | South Korea by $92 million, primarily due to the favorable impact in 2006 of $60 million in DAC amortization associated with the implementation of a more refined reserve valuation system and additional expenses in 2007 associated with growth and infrastructure initiatives, as well as business growth and higher bank insurance fees, partially offset by a decrease in DAC amortization related to market performance. | |
• | Mexico by $27 million primarily due to higher expenses related to business growth and the favorable impact in 2006 of liabilities related to employment matters that were reduced, offset by a decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years, and a decrease in liabilities based on a review of outstanding remittances. | |
• | India by $14 million primarily due to headcount increases and growth initiatives, partially offset by the impact of management’s update of assumptions used to determine estimated gross profits. | |
• | Australia by $12 million primarily due to business growth and changes in foreign currency exchange rates. | |
• | Chile by $12 million primarily due to higher compensation costs, higher spending on infrastructure and marketing programs and growth, partially offset by a decrease in DAC amortization related to inflation indexing. |
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• | Hong Kong by $11 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Ireland by $10 million due to additionalstart-up costs, as well as $5 million of foreign currency transaction losses. | |
• | Brazil by $9 million primarily due to changes in foreign currency exchange rates, partially offset by an increase in litigation liabilities in 2006. | |
• | The United Kingdom by $2 million due to changes in foreign currency rates and higher spending on business initiatives, partially offset by lower DAC amortization resulting from calculation refinements. |
• | Taiwan by $118 million primarily due to a one-time increase in DAC amortization in 2006 of $77 million due to a loss recognition adjustment resulting from low interest rates relative to product guarantees coupled with high persistency rates on certain blocks of business, an increase in DAC amortization in 2006 associated with the implementation of a new valuation system, expenses of $17 million in 2006 related the termination of the agency distribution channel and expense reductions recognized in 2007 due to elimination of the agency distribution channel. | |
• | The home office of $4 million primarily due to the elimination of certain intercompany expenses previously charged to the International Segment, offset by higher spending on growth and infrastructure initiatives. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 2,971 | $ | 2,966 | $ | 2,924 | ||||||
Net investment income | 186 | 196 | 177 | |||||||||
Other revenues | 38 | 43 | 22 | |||||||||
Net investment gains (losses) | (135 | ) | 15 | 3 | ||||||||
Total revenues | 3,060 | 3,220 | 3,126 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 1,919 | 1,807 | 1,717 | |||||||||
Policyholder dividends | 5 | 4 | 5 | |||||||||
Other expenses | 804 | 829 | 846 | |||||||||
Total expenses | 2,728 | 2,640 | 2,568 | |||||||||
Income before provision for income tax | 332 | 580 | 558 | |||||||||
Provision for income tax | 57 | 144 | 142 | |||||||||
Net income | $ | 275 | $ | 436 | $ | 416 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 28 | $ | 35 | $ | 37 | ||||||
Net investment income | 817 | 1,419 | 998 | |||||||||
Other revenues | 184 | 72 | 43 | |||||||||
Net investment gains (losses) | 947 | 45 | (154 | ) | ||||||||
Total revenues | 1,976 | 1,571 | 924 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 48 | 46 | 38 | |||||||||
Interest credited to policyholder account balances | 7 | — | — | |||||||||
Other expenses | 1,898 | 1,409 | 1,362 | |||||||||
Total expenses | 1,953 | 1,455 | 1,400 | |||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 23 | 116 | (476 | ) | ||||||||
Provision for income tax | (143 | ) | (129 | ) | (437 | ) | ||||||
Income (loss) from continuing operations | 166 | 245 | (39 | ) | ||||||||
Income (loss) from discontinued operations, net of income tax | (293 | ) | 195 | 3,285 | ||||||||
Net income (loss) | (127 | ) | 440 | 3,246 | ||||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Net income (loss) available to common shareholders | $ | (252 | ) | $ | 303 | $ | 3,112 | |||||
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• | The Company is participating in certain economic stabilization programs established by various government institutions. The Federal Reserve Bank of New York’s Commercial Paper Funding Facility (“CPFF”) is intended to improve liquidity in short-term funding markets by increasing the availability of term commercial paper funding to issuers and by providing greater assurance to both issuers and investors that firms will be able to rollover their maturing commercial paper. MetLife Short Term Funding LLC, the issuer of commercial paper under a program supported by funding agreements issued by Metropolitan Life Insurance Company and MetLife Insurance Company of Connecticut, was accepted in October 2008 for the CPFF and may issue a maximum amount of $3.8 billion under the CPFF. At December 31, 2008, MetLife Short Term Funding LLC had used $1,650 million of its available capacity under the CPFF, and such amount was deposited under the related funding agreements. MetLife Funding, Inc. was accepted in November 2008 for the Federal Reserve Bank of New York’s CPFF and may issue a maximum amount of $1 billion under the CPFF. No drawdown by MetLife Funding, Inc. has taken place under this facility as of the date hereof. In December 2008, MetLife, Inc. elected to continue to participate in the debt guarantee component of the Federal Deposit Insurance Corporation’s (“FDIC”) Temporary Liquidity Guarantee Program (the “FDIC Program”). Under the terms of the FDIC Program, the FDIC will guarantee through June 2012 (or maturity, if earlier) the payment of certain newly-issued senior unsecured debt of MetLife, Inc. and any eligible affiliates. The Company also notified the FDIC that it elected the option of excluding specified senior unsecured debt maturing after June 30, 2012 from the guarantee before reaching the limits on the amount of guaranteed debt under the FDIC Program ($398 million for MetLife, Inc. and $178 million for MetLife Bank, N.A. which may issue guaranteed debt under its limit, as well as unused amounts under MetLife, Inc.’s limit). The Company opted out of the component of the FDIC Program that guarantees non-interest bearing deposit transaction accounts. Management cannot predict how the markets may react to these elections or to any debt issued subject to the terms of the FDIC Program. |
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• | MetLife Bank, N.A. has pledged loans and securities with the Federal Reserve Bank of New York to have the capacity to borrow at the Discount Window or under the Term Auction Facility. At December 31, 2008, MetLife Bank had borrowed $950 million under the Term Auction Facility for various short-term maturities. In addition, as a member of the Federal Home Loan Bank of New York (“FHLB of NY”), MetLife Bank has entered into repurchase agreements with FHLB of NY on a short-term and long-term basis, with a total liability for repurchase agreements with the FHLB of NY of $1.8 billion at December 31, 2008. Management expects MetLife Bank to take further advantage of these funding sources in the future. In addition, the Company had obligations under funding agreements with the FHLB of NY of $15.2 billion and $4.6 billion at December 31, 2008 and December 31, 2007 respectively for MLIC and with the FHLB of Boston of $526 million and $726 million at December 31, 2008 and December 31, 2007 respectively for MICC. The FHLB of Boston had also advanced $300 million to MICC at December 31, 2008, which is included in short-term debt. In the current market environment, the Federal Home Loan Bank system has demonstrated its commitment to provide funding to its members especially through these stressful market conditions. Management expects the renewal of these funding resources. See Note 7 of the Notes to the Consolidated Financial Statements |
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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 | ) | $ | 2,850 | $ | 2,313 | $ | — | $ | 537 | ||||||||||
MetLife Bank, N.A | July 2009 (2 | ) | 300 | — | 100 | 200 | ||||||||||||||
Total | $ | 3,150 | $ | 2,313 | $ | 100 | $ | 737 | ||||||||||||
(1) | In December 2008, the Holding Company and MetLife Funding, Inc. entered into an amended and restated $2.85 billion credit agreement with various financial institutions. The agreement amended and restated the $3.0 billion credit agreement entered into in June 2007. Proceeds are available to be used for general corporate purposes, to support their commercial paper programs and for the issuance of letters of credit. The Company limits its commercial paper outstanding relative to the amount of unused commitments under this facility. 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. Fees for this agreement include a 0.25% facility fee, 0.075% fronting fee, a letter of credit fee between 1% and 5% based on certain market rates and a 0.05% utilization fee, as applicable, and may vary based on MetLife, Inc.’s senior unsecured ratings. The Holding Company and MetLife Funding, Inc. incurred amendment costs of $11 million related to the $2,850 million amended and restated credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. The Holding Company did not have any deferred financing costs associated with the original June 2007 credit agreement. | |
(2) | In July 2008, the facility was increased by $100 million and its maturity extended for one year to July 2009. Fees for this agreement include a commitment fee of $10,000 and a margin of Federal Funds plus 0.11%, as applicable. |
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Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
MetLife, Inc. | August 2009 (1) | $ | 500 | $ | — | $ | 500 | $ | — | — | ||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 (3) | 500 | — | 490 | 10 | 7 | ||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 (2),(4) | 650 | — | 410 | 240 | 19 | ||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 (5) | 3,500 | 2,692 | — | 808 | 29 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 (2),(6) | 2,896 | — | 1,359 | 1,537 | 29 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 (2),(7) | 3,500 | — | 1,500 | 2,000 | 29 | ||||||||||||||||
Total | $ | 11,546 | $ | 2,692 | $ | 4,259 | $ | 4,595 | ||||||||||||||
(1) | In December 2008, the Holding Company entered into an amended and restated one year $500 million letter of credit facility (dated as of August 2008 and amended and restated at December 31, 2008), with an unaffiliated financial institution, Exeter Reassurance Company, Ltd. (“Exeter”) is a co-applicant under this letter of credit facility. This letter of credit facility matures in August 2009, except that letters of credit outstanding upon termination may remain outstanding until August 2010. Fees for this agreement include a margin of 2.25% and a utilization fee of 0.05%, as applicable. The Holding Company incurred amendment costs of $1.3 million related to the $500 million amended and restated letter of credit facility, which has been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | 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. | |
(4) | In December 2008, Exeter, as borrower, and the Holding Company, as guarantor, entered into an amendment of an existing credit agreement with an unaffiliated financial institution. Issuances under this facility are set to expire in December 2027. Exeter incurred amendment costs of $1.6 million related to the amendment of the existing credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(5) | In May 2007, 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 of the Notes to the Consolidated Financial Statements, which may be extended by agreement of the Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. At December 31, 2008, $2.7 billion had been drawn upon under the collateral financing arrangement. | |
(6) | In December 2007, Exeter terminated four letters of credit, with expirations from March 2025 through December 2026, which were issued under a letter of credit facility with an unaffiliated financial institution in an aggregate amount of $1.7 billion. The letters of credit had served as collateral for Exeter’s obligations under a reinsurance agreement that was recaptured by MetLife Investors USA Insurance Company (“MLI-USA”) in December 2007. MLI-USA immediately thereafter entered into a new reinsurance agreement with MetLife Reinsurance Company of Vermont (“MRV”). To collateralize its reinsurance obligations, MRV and the Holding Company entered into a30-year, $2.9 billion letter of credit facility with an unaffiliated financial institution. |
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(7) | In September 2008, MRV and the Holding Company entered into a30-year, $3.5 billion letter of credit facility with an unaffiliated financial institution. These letters of credit serve as collateral for MRV’s obligations under a reinsurance agreement. |
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More Than | ||||||||||||||||||||||||
More Than | Three Years | |||||||||||||||||||||||
One Year and | and Less | |||||||||||||||||||||||
Less Than | Less Than | Than Five | More Than | |||||||||||||||||||||
Contractual Obligations | Total | One Year | Three Years | Years | Five Years | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Future policy benefits | (1 | ) | $ | 316,201 | $ | 7,116 | $ | 11,013 | $ | 11,278 | $ | 286,794 | ||||||||||||
Policyholder account balances | (2 | ) | 201,975 | 38,562 | 27,362 | 18,690 | 117,361 | |||||||||||||||||
Other policyholder liabilities | (3 | ) | 5,890 | 5,890 | — | — | — | |||||||||||||||||
Short-term debt | (4 | ) | 2,662 | 2,662 | — | — | — | |||||||||||||||||
Long-term debt | (4 | ) | 16,703 | 1,072 | 2,232 | 2,091 | 11,308 | |||||||||||||||||
Collateral financing arrangements | (4 | ) | 8,138 | 122 | 243 | 243 | 7,530 | |||||||||||||||||
Junior subordinated debt securities | (4 | ) | 9,637 | 1,278 | 409 | 409 | 7,541 | |||||||||||||||||
Payables for collateral under securities loaned and other transactions | (5 | ) | 31,059 | 31,059 | — | — | — | |||||||||||||||||
Commitments to lend funds | (6 | ) | 8,196 | 8,011 | 147 | 6 | 32 | |||||||||||||||||
Operating leases | (7 | ) | 2,141 | 278 | 460 | 323 | 1,080 | |||||||||||||||||
Other | (8 | ) | 10,515 | 10,161 | 6 | 3 | 345 | |||||||||||||||||
Total | $ | 613,117 | $ | 106,211 | $ | 41,872 | $ | 33,043 | $ | 431,991 | ||||||||||||||
(1) | Future policyholder benefits include liabilities related to traditional whole life policies, term life policies, closeout and other group annuity contracts, structured settlements, master terminal funding agreements, single premium immediate annuities, long-term disability policies, individual disability income policies, LTC policies and property and casualty contracts. | |
Included within future policyholder benefits are contracts where the Company is currently making payments and will continue to do so until the occurrence of a specific event such as death, as well as those where the timing of a portion of the payments has been determined by the contract. Also included are contracts where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death or illness, or where the occurrence of the payment triggering event, such as a surrender of a policy or contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience as well as its expectation of future payment patterns. | ||
Liabilities related to accounting conventions or which are not contractually due, such as shadow liabilities, excess interest reserves and property and casualty loss adjustment expenses of $303 million, have been excluded from amounts presented in the table above. | ||
Amounts presented in the table above, excluding those related to property and casualty contracts, represent the estimated cash payments for benefits under such contracts including assumptions related to the receipt of future premiums and assumptions related to mortality, morbidity, policy lapse, renewal, retirement, inflation, disability incidence, disability terminations, policy loans and other contingent events as appropriate to the respective product type. Payments for case reserve liabilities and incurred but not reported liabilities associated with property and casualty contracts of $1.5 billion have been included using an estimate of the ultimate amount to be settled under the policies based upon historical payment patterns. The ultimate amount to be paid under property and casualty contracts is not determined until the Company reaches a settlement with the claimant, which may vary significantly from the liability or contractual obligation presented above especially as it relates to incurred but not reported liabilities. All estimated cash payments presented in the table above are undiscounted as to interest, net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. The more than five years category displays estimated payments due for periods extending for more than 100 years from the present date. |
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The sum of the estimated cash flows shown for all years in the table of $316.2 billion exceeds the liability amount of $130.6 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions, most significantly mortality, between the date the liabilities were initially established and the current date. | ||
For the majority of the Company’s insurance operations, estimated contractual obligations for future policy benefits and policyholder account balance liabilities as presented in the table above are derived from the annual asset adequacy analysis used to develop actuarial opinions of statutory reserve adequacy for state regulatory purposes. These cash flows are materially representative of the cash flows under generally accepted accounting principles. | ||
Actual cash payments to policyholders may differ significantly from the liabilities as presented in the consolidated balance sheet and the estimated cash payments as presented in the table above due to differences between actual experience and the assumptions used in the establishment of these liabilities and the estimation of these cash payments. | ||
(2) | Policyholder account balances include liabilities related to conventional guaranteed investment contracts, guaranteed investment contracts associated with formal offering programs, funding agreements, individual and group annuities, total control accounts, bank deposits, individual and group universal life, variable universal life and company-owned life insurance. | |
Included within policyholder account balances are contracts where the amount and timing of the payment is essentially fixed and determinable. These amounts relate to policies where the Company is currently making payments and will continue to do so, as well as those where the timing of the payments has been determined by the contract. Other contracts involve payment obligations where the timing of future payments is uncertain and where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death, or where the occurrence of the payment triggering event, such as a surrender of or partial withdrawal on a policy or deposit contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience, as well as its expectation of future payment patterns. | ||
Excess interest reserves representing purchase accounting adjustments of $692 million have been excluded from amounts presented in the table above as they represent an accounting convention and not a contractual obligation. | ||
Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate to the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot rates. | ||
The sum of the estimated cash flows shown for all years in the table of $202.0 billion exceeds the liability amount of $149.8 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions between the date the liabilities were initially established and the current date. See the comments under footnote 1 regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policyholder benefits and policyholder account balances. See also “Extraordinary Market Conditions.” | ||
(3) | Other policyholder liabilities are comprised of other policyholder funds, policyholder dividends payable and the policyholder dividend obligation. Amounts included in the table above related to these liabilities are as follows: | |
a. Other policyholder funds includes liabilities for incurred but not reported claims and claims payable on group term life, long-term disability, LTC and dental; policyholder dividends left on deposit and policyholder dividends due and unpaid related primarily to traditional life and group life and health; and premiums received in advance. Liabilities related to unearned revenue of $1.9 billion have been excluded from the cash payments presented in the table above because they reflect an accounting convention and not a contractual obligation. With the exception of policyholder dividends left on deposit, and those |
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items excluded as noted in the preceding sentence, the contractual obligation presented in the table above related to other policyholder funds is equal to the liability reflected in the consolidated balance sheet. Such amounts are reported in the less than one year category due to the short-term nature of the liabilities. Contractual obligations on policyholder dividends left on deposit are projected based on assumptions of policyholder withdrawal activity. | ||
b. Policyholder dividends payable consists of liabilities related to dividends payable in the following calendar year on participating policies. As such, the contractual obligation related to policyholder dividends payable is presented in the table above in the less than one year category at the amount of the liability presented in the consolidated balance sheet. | ||
c. The nature of the policyholder dividend obligation is described in Note 9 of the Notes to Consolidated Financial Statements. Because the exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the policyholder dividend obligation is based upon a long-term projection of the performance of the closed block, management has reflected the obligation at the amount of the liability, if any, presented in the consolidated balance sheet in the more than five years category. This was done to reflect the long-duration of the liability and the uncertainty of the ultimate cash payment. | ||
(4) | Amounts presented in the table above for short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities differ from the balances presented on the consolidated balance sheet as the amounts presented in the table above do not include premiums or discounts upon issuance or purchase accounting fair value adjustments. The amounts presented above also include interest on such obligations as described below. | |
Short-term debt consists of borrowings with original maturities of less than one year carrying fixed interest rates. The contractual obligation for short-term debt presented in the table above represents the amounts due upon maturity plus the related interest for the period from January 1, 2009 through maturity. | ||
Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at December 31, 2008 and, as such, does not consider the impact of future rate movements. Long-term debt also includes payments under capital lease obligations of $14 million, $5 million, $1 million and $28 million, in the less than one year, one to three years, three to five years and more than five years categories, respectively. | ||
Collateral financing arrangements bear interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at December 31, 2008 and, as such, does not consider the impact of future rate movements. Pursuant to these collateral financing arrangements, the Holding Company may be required to deliver cash or pledge collateral to the respective unaffiliated financial institutions. See “Holding Company — Global Funding Sources.” |
Junior subordinated debt securities bear interest at fixed interest rates through their respective redemption dates. Interest was computed using the stated rates on the obligations through the scheduled redemption dates as it is the Company’s expectation that the debt will be redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity dates would increase the contractual obligation by $4.6 billion. | ||
(5) | The Company has accepted cash collateral in connection with securities lending and derivative transactions. As the securities lending transactions expire within the next year or the timing of the return of the collateral is uncertain, the return of the collateral has been included in the less than one year category in the table above. The Company also holds non-cash collateral, which is not reflected as a liability in the consolidated balance sheet, of $1.2 billion at December 31, 2008. | |
(6) | The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities, bridge loans and private corporate bond investments. In the table above, the timing of the funding of mortgage loans and private corporate bond investments is based on the expiration date of the commitment. As it relates to commitments to lend funds to partnerships and under bank credit facilities, the Company anticipates that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are presented in the less than one year category in the table |
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above. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the less than one year category in the table above. See “— Off-Balance Sheet Arrangements.” | ||
(7) | As a lessee, the Company has various operating leases, primarily for office space. Contractual provisions exist that could increase or accelerate those leases obligations presented, including various leases with early buyouts and/or escalation clauses. However, the impact of any such transactions would not be material to the Company’s financial position or results of operations. See “— Off-Balance Sheet Arrangements.” | |
(8) | Other includes those other liability balances which represent contractual obligations, as well as other miscellaneous contractual obligations of $12 million not included elsewhere in the table above. Other liabilities presented in the table above are principally comprised of amounts due under reinsurance arrangements, payables related to securities purchased but not yet settled, securities sold short, accrued interest on debt obligations, estimated fair value of derivative obligations, deferred compensation arrangements, guaranty liabilities, the estimated fair value of forward stock purchase contracts, as well as general accruals and accounts payable due under contractual obligations. If the timing of any of the other liabilities is sufficiently uncertain, the amounts are included within the less than one year category. | |
The other liabilities presented in the table above differs from the amount presented in the consolidated balance sheet by $4.0 billion due primarily to the exclusion of items such as minority interests, legal liabilities, pension and postretirement benefit obligations, taxes due other than income tax, unrecognized tax benefits and related accrued interest, accrued severance and employee incentive compensation and other liabilities such as deferred gains and losses. Such items have been excluded from the table above as they represent accounting conventions or are not liabilities due under contractual obligations. | ||
The net funded status of the Company’s pension and other postretirement liabilities included within other liabilities has been excluded from the amounts presented in the table above. Rather, the amounts presented represent the discretionary contributions of $150 million to be made by the Company to the pension plan in 2009 and the discretionary contributions of $120 million, based on the current year’s expected gross benefit payments to participants, to be made by the Company to the postretirement benefit plans during 2009. Virtually all contributions to the pension and postretirement benefit plans are made by the insurance subsidiaries of the Holding Company with little impact on the Holding Company’s cash flows. | ||
Excluded from the table above are unrecognized tax benefits and accrued interest of $766 million and $176 million, respectively, for which the Company cannot reliably determine the timing of payment. Current income tax payable is also excluded from the table. | ||
See also “— Off-Balance Sheet Arrangements.” |
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RBC Ratios — Bank Holding Company
December 31,
Regulatory | Regulatory | |||||||||||||||
Requirements | Requirements | |||||||||||||||
2008 | 2007 | Minimum | “Well Capitalized” | |||||||||||||
Total RBC Ratio | 9.52% | 9.87% | 8.00 | % | 10.00 | % | ||||||||||
Tier 1 RBC Ratio | 9.21% | 9.56% | 4.00 | % | 6.00 | % | ||||||||||
Tier 1 Leverage Ratio | 5.77% | 5.56% | 4.00 | % | n/a |
RBC Ratios — Bank
December 31,
Regulatory | Regulatory | |||||||||||||||
Requirements | Requirements | |||||||||||||||
2008 | 2007 | Minimum | “Well Capitalized” | |||||||||||||
Total RBC Ratio | 12.32% | 12.60% | 8.00 | % | 10.00 | % | ||||||||||
Tier 1 RBC Ratio | 11.72% | 12.03% | 4.00 | % | 6.00 | % | ||||||||||
Tier 1 Leverage Ratio | 6.51% | 6.32% | 4.00 | % | 5.00 | % |
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2009 | 2008 | 2007 | ||||||||||||||||||
Permitted | Permitted | Permitted | ||||||||||||||||||
w/o | w/o | w/o | ||||||||||||||||||
Company | Approval (1) | Paid (2) | Approval (3) | Paid (2) | Approval (3) | |||||||||||||||
(In millions) | ||||||||||||||||||||
Metropolitan Life Insurance Company | $ | 552 | $ | 1,318 | (4) | $ | 1,299 | $ | 500 | $ | 919 | |||||||||
MetLife Insurance Company of Connecticut | $ | 714 | $ | 500 | $ | 1,026 | $ | 690 | (6) | $ | 690 | |||||||||
Metropolitan Tower Life Insurance Company | $ | 88 | $ | 277 | (5) | $ | 113 | $ | — | $ | 104 | |||||||||
Metropolitan Property and Casualty Insurance Company | $ | 9 | $ | 300 | $ | — | $ | 400 | $ | 16 |
(1) | Reflects dividend amounts that may be paid during 2009 without prior regulatory approval. However, if paid before a specified date during 2009, 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) | Consists of shares of RGA stock distributed by Metropolitan Life Insurance Company to the Holding Company as an in-kind dividend of $1,318 million. | |
(5) | Includes shares of an affiliate distributed to the Holding Company as an in-kind dividend of $164 million. | |
(6) | 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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• | In December 2007, the Holding Company, in connection with the collateral financing arrangement associated with MRC’s reinsurance of the closed block liabilities, entered into an agreement with an unaffiliated financial institution under which the Holding Company is entitled to the interest paid by MRC on the surplus notes of3-month LIBOR plus 0.55% in exchange for the payment of3-month LIBOR plus 1.12%, payable quarterly. |
• | In May 2007, the Holding Company, in connection with the collateral financing arrangement associated with MRSC’s reinsurance of universal life secondary guarantees, entered into an agreement with an unaffiliated |
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financial institution under which the Holding Company is entitled to the return on the investment portfolio held by a 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 0.70%, 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 fair 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 agreement 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. For the year ended December 31, 2008, the Holding Company paid $320 million to the unaffiliated financial institution as a result of the decline in the fair value of the assets in the trust. All of the $320 million was deposited into the trust. In January 2009, the Holding Company paid an additional $360 million to the unaffiliated financial institution as a result of the continued decline in the fair value of the assets in trust which was also deposited into the trust. In addition, the Holding Company may be required to pledge collateral to the unaffiliated financial institution under this agreement. At December 31, 2008, the Holding Company had pledged $86 million under the agreement. No collateral had been pledged under the agreement as December 31, 2007. Interest expense incurred by the Holding Company under the collateral financing arrangement for the years ended December 31, 2008 and 2007 was $107 million and $84 million, respectively. The allocation of these financing costs to MRSC is included in other revenues and recorded as an additional investment in MRSC. |
Date | Principal | Interest Rate | Maturity | |||||||||
(In millions) | ||||||||||||
August 2008 | $ | 1,035 | 6.82 | % | 2018 | |||||||
June 2005 | $ | 1,000 | 5.00 | % | 2015 | |||||||
June 2005 | $ | 1,000 | 5.70 | % | 2035 | |||||||
June 2005 (1) | $ | 585 | 5.25 | % | 2020 | |||||||
December 2004 (1) | $ | 512 | 5.38 | % | 2024 | |||||||
June 2004 | $ | 350 | 5.50 | % | 2014 | |||||||
June 2004 | $ | 750 | 6.38 | % | 2034 | |||||||
November 2003 | $ | 500 | 5.00 | % | 2013 | |||||||
November 2003 | $ | 200 | 5.88 | % | 2033 | |||||||
December 2002 | $ | 400 | 5.38 | % | 2012 | |||||||
December 2002 | $ | 600 | 6.50 | % | 2032 | |||||||
November 2001 | $ | 750 | 6.13 | % | 2011 |
(1) | This amount represents the translation of pounds sterling into U.S. dollars using the noon buying rate on December 31, 2008 of $1.4619 as announced by the Federal Reserve Bank of New York. |
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Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
MetLife, Inc. | August 2009 (1) | $ | 500 | $ | — | $ | 500 | $ | — | — | ||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 (2) | 500 | — | 490 | 10 | 7 | ||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 (3),(4) | 650 | — | 410 | 240 | 19 | ||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 (5) | 3,500 | 2,692 | — | 808 | 29 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 (3),(6) | 2,896 | — | 1,359 | 1,537 | 29 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 (3),(7) | 3,500 | — | 1,500 | 2,000 | 29 | ||||||||||||||||
Total | $ | 11,546 | $ | 2,692 | $ | 4,259 | $ | 4,595 | ||||||||||||||
(1) | In December 2008, the Holding Company entered into an amended and restated one year $500 million letter of credit facility (dated as of August 2008 and amended and restated at December 31, 2008 with an unaffiliated financial institution, Exeter Reassurance Company, Ltd. is a co-applicant under this letter of credit facility. This letter of credit facility matures in August 2009, except that letters of credit outstanding upon termination may remain outstanding until August 2010. Fees for this agreement include a margin of 2.25% and a utilization fee of 0.05%, as applicable. The Holding Company incurred amendment costs of $1.3 million related to the $500 million amended and restated letter of credit facility, which has been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(2) | 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. | |
(3) | The Holding Company is a guarantor under this agreement. | |
(4) | In December 2008, Exeter as borrower and the Holding Company as guarantor entered into an amendment of an existing credit agreement with an unaffiliated financial institution. Issuances under this facility are set to expire in December 2027. Exeter incurred amendment costs of $1.6 million related to the amendment of the existing |
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credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | ||
(5) | In May 2007, MetLife Reinsurance Company of South Carolina 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 of the Notes to the Consolidated Financial Statements, which may be extended by agreement of the Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. At December 31, 2008, $2.7 billion had been drawn upon under the collateral financing arrangement. | |
(6) | In December 2007, Exeter Reassurance Company Ltd. terminated four letters of credit, with expirations from March 2025 through December 2026, which 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. 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. | |
(7) | In September 2008, MRV and the Holding Company entered into a30-year, $3.5 billion letter of credit facility with an unaffiliated financial institution. These letters of credit serve as collateral for MRV’s obligations under a reinsurance agreement. |
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Dividend | ||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||||||
(In millions, except per share data) | ||||||||||||||||
October 28, 2008 | November 10, 2008 | December 15, 2008 | $ | 0.74 | $ | 592 | ||||||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 | ||||||||||
October 24, 2006 | November 6, 2006 | December 15, 2006 | $ | 0.59 | $ | 450 |
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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 17, 2008 | November 30, 2008 | December 15, 2008 | $ | 0.2527777 | $ | 7 | $ | 0.4062500 | $ | 24 | ||||||||||
August 15, 2008 | August 31, 2008 | September 15, 2008 | $ | 0.2555555 | $ | 6 | $ | 0.4062500 | $ | 24 | ||||||||||
May 15, 2008 | May 31, 2008 | June 16, 2008 | $ | 0.2555555 | $ | 7 | $ | 0.4062500 | $ | 24 | ||||||||||
March 5, 2008 | February 29, 2008 | March 17, 2008 | $ | 0.3785745 | $ | 9 | $ | 0.4062500 | $ | 24 | ||||||||||
$ | 29 | $ | 96 | |||||||||||||||||
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 | |||||||||||||||||
December 31, | ||||||||||||
Subsidiaries | Interest Rate | Maturity Date | 2008 | 2007 | ||||||||
(In millions) | ||||||||||||
Metropolitan Life Insurance Company | 3-month LIBOR + 1.15% | December 31, 2009 | $ | 700 | $ | 700 | ||||||
Metropolitan Life Insurance Company | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
Metropolitan Life Insurance Company | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
MetLife Investors USA Insurance Company | 7.35% | April 1, 2035 | — | 400 | ||||||||
Total | $ | 1,200 | $ | 1,600 | ||||||||
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• | In February 2008, the Holding Company entered into an accelerated common stock repurchase agreement with a major bank. Under the agreement, the Holding Company paid the bank $711 million in cash and the bank delivered an initial amount of 11,161,550 shares of the Holding Company’s outstanding common stock that the bank borrowed from third parties. In May 2008, the bank delivered an additional 864,646 shares of the Holding Company’s common stock to the Company resulting in a total of 12,026,196 shares being repurchased under the agreement. The Holding Company recorded the shares repurchased as treasury stock. | |
• | In December 2007, the Holding Company entered into an accelerated common stock repurchase agreement with a major bank. Under the terms of the agreement, the Holding Company paid the bank $450 million in cash in January 2008 in exchange for 6,646,692 shares of its outstanding common stock that the bank borrowed from third parties. Also, in January 2008, the bank delivered 1,043,530 additional shares of Holding Company’s common stock to the Holding Company resulting in a total of 7,690,222 shares being repurchased under the agreement. At December 31, 2007, the Holding Company recorded the obligation to pay $450 million to the bank as a reduction of additional paid-in capital. Upon settlement with the bank, the Holding Company increased additional paid-in capital and reduced treasury stock. | |
• | In November 2007, the Holding Company repurchased 11,559,803 shares of its outstanding common stock at an initial cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Holding Company from third parties and purchased the common stock in the open market to return to such third parties. Also, in November 2007, the Holding Company received a cash adjustment of $19 million based on the trading price of the common stock during the repurchase period, for a final purchase price of $731 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. | |
• | In March 2007, the Holding Company repurchased 11,895,321 shares of its outstanding common stock at an aggregate cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Holding Company from third parties and purchased common stock in the open market to return to such third parties. In June 2007, the Holding Company paid a cash adjustment of $17 million for a final purchase price of $767 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. | |
• | In December 2006, the Holding Company repurchased 3,993,024 shares of its outstanding common stock at an aggregate cost of $232 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Holding Company from third parties and purchased the common stock in the open market to return to such third parties. In February 2007, the Holding Company paid a cash adjustment of $8 million for a final purchase price of $240 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at beginning of the period, | $ | 4,814 | $ | 4,801 | $ | 4,701 | ||||||
Acquisitions (1) | 256 | 2 | 93 | |||||||||
Other, net (2) | (62 | ) | 11 | 7 | ||||||||
Balance at the end of the period | $ | 5,008 | $ | 4,814 | $ | 4,801 | ||||||
(1) | See “— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Acquisitions and Dispositions” for a description of acquisitions and dispositions. | |
(2) | Consists principally of foreign currency translation adjustments. |
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Institutional: | ||||||||
Group life | $ | 15 | $ | 15 | ||||
Retirement & savings | 887 | 887 | ||||||
Non-medical health & other | 149 | 76 | ||||||
Subtotal | 1,051 | 978 | ||||||
Individual: | ||||||||
Traditional life | 73 | 73 | ||||||
Variable & universal life | 1,174 | 1,174 | ||||||
Annuities | 1,692 | 1,692 | ||||||
Other | 18 | 18 | ||||||
Subtotal | 2,957 | 2,957 | ||||||
International: | ||||||||
Latin America region | 184 | 104 | ||||||
European region | 37 | 50 | ||||||
Asia Pacific region | 152 | 159 | ||||||
Subtotal | 373 | 313 | ||||||
Auto & Home | 157 | 157 | ||||||
Corporate & Other (1) | 470 | 409 | ||||||
Total | $ | 5,008 | $ | 4,814 | ||||
(1) | The allocation of the goodwill to the reporting units is performed at the time of the respective acquisition. The $470 million of goodwill within Corporate & Other relates to goodwill acquired as a part of the Travelers acquisition of $405 million, as well as acquisitions by MetLife Bank which resides within Corporate & Other. For purposes of goodwill impairment testing at December 31, 2008 and 2007, $405 million of Corporate & Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual segment was attributed $210 million, (traditional life — $23 million, variable & universal life — $11 million and annuities — $176 million) and the Institutional segment was attributed $195 million, (group life — $2 million, retirement & savings — $186 million, and non-medical health & other — $7 million) at both December 31, 2008 and 2007. |
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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 | $ | 1,938 | $ | — | $ | (992 | ) | $ | 946 | |||||||
Other assets: Intangible asset | $ | 12 | (12 | ) | — | $ | — | |||||||||
Other liabilities: Accrued pension benefit cost | $ | (497 | ) | (14 | ) | (66 | ) | $ | (577 | ) | ||||||
Other liabilities: Accrued other postretirement benefit plan cost | $ | (794 | ) | — | (95 | ) | $ | (889 | ) | |||||||
Subtotal | (26 | ) | (1,153 | ) | ||||||||||||
Net liability of subsidiary held-for-sale | — | (18 | ) | |||||||||||||
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 | ) | ||||
December 31, | ||||||||||||||||
Other | ||||||||||||||||
Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Benefit obligation at end of year | $ | 6,041 | $ | 5,722 | $ | 1,632 | $ | 1,599 | ||||||||
Fair value of plan assets at end of year | 5,559 | 6,520 | 1,011 | 1,183 | ||||||||||||
Funded status at end of year | $ | (482 | ) | $ | 798 | $ | (621 | ) | $ | (416 | ) | |||||
Amounts recognized in the consolidated balance sheet consist of: | ||||||||||||||||
Other assets | $ | 227 | $ | 1,396 | $ | — | $ | — | ||||||||
Other liabilities | (709 | ) | (598 | ) | (621 | ) | (416 | ) | ||||||||
Net amount recognized | $ | (482 | ) | $ | 798 | $ | (621 | ) | $ | (416 | ) | |||||
Accumulated other comprehensive (income) loss: | ||||||||||||||||
Net actuarial (gains) losses | $ | 2,184 | $ | 623 | $ | 147 | $ | (112 | ) | |||||||
Prior service cost (credit) | 45 | 64 | (157 | ) | (193 | ) | ||||||||||
2,229 | 687 | (10 | ) | (305 | ) | |||||||||||
Deferred income tax and minority interest | (780 | ) | (251 | ) | 4 | 109 | ||||||||||
$ | 1,449 | $ | 436 | $ | (6 | ) | $ | (196 | ) | |||||||
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December 31, | ||||||||||||||||||||||||
Qualified Plans | Non-Qualified Plans | Total | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aggregate fair value of plan assets (principally Company contracts) | $ | 5,559 | $ | 6,520 | $ | — | $ | — | $ | 5,559 | $ | 6,520 | ||||||||||||
Aggregate projected benefit obligation | 5,356 | 5,139 | 685 | 583 | 6,041 | 5,722 | ||||||||||||||||||
Over (under) funded | $ | 203 | $ | 1,381 | $ | (685 | ) | $ | (583 | ) | $ | (482 | ) | $ | 798 | |||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Projected benefit obligation | $ | 708 | $ | 597 | ||||
Accumulated benefit obligation | $ | 590 | $ | 517 | ||||
Fair value of plan assets | $ | — | $ | — |
December 31, | ||||||||||||||||
Other | ||||||||||||||||
Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Projected benefit obligation | $ | 712 | $ | 602 | $ | 1,632 | $ | 1,599 | ||||||||
Fair value of plan assets | $ | 4 | $ | 4 | $ | 1,011 | $ | 1,183 |
December 31, | ||||
2008 | 2007 | |||
Weighted average discount rate | 6.60% | 6.65% | ||
Rate of compensation increase | 3.5% - 7.5% | 3.5% - 8% | ||
Average expected retirement age | 63 | 63 |
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December 31, | ||||
2008 | 2007 | |||
Pre-Medicare eligible claims | 8.8% down to 5.8% in 2018 and | 8.5% down to 5% in 2014 and | ||
gradually decreasing until 2079 | remaining constant thereafter | |||
reaching the ultimate rate of 4.1% | ||||
Medicare eligible claims | 8.8% down to 5.8% in 2018 and | 10.5% down to 5% in 2018 and | ||
gradually decreasing until 2079 | remaining constant thereafter | |||
reaching the ultimate rate of 4.1% |
One Percent | One Percent | |||||||
Increase | Decrease | |||||||
(In millions) | ||||||||
Effect on total of service and interest cost components | $ | 6 | $ | (6 | ) | |||
Effect of accumulated postretirement benefit obligation | $ | 76 | $ | (86 | ) |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Cumulative reduction in benefit obligation: | ||||||||||||
Balance, beginning of year | $ | 299 | $ | 328 | $ | 298 | ||||||
Service cost | 5 | 7 | 6 | |||||||||
Interest cost | 20 | 19 | 19 | |||||||||
Net actuarial gains (losses) | 3 | (42 | ) | 15 | ||||||||
Prescription drug subsidy | (10 | ) | (13 | ) | (10 | ) | ||||||
Balance, end of year | $ | 317 | $ | 299 | $ | 328 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Reduction in net periodic benefit cost: | ||||||||||||
Service cost | $ | 5 | $ | 7 | $ | 6 | ||||||
Interest cost | 20 | 19 | 19 | |||||||||
Amortization of net actuarial gains (losses) | — | 5 | 30 | |||||||||
Total reduction in net periodic benefit cost | $ | 25 | $ | 31 | $ | 55 | ||||||
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December 31, | ||||||||||
Weighted Average | Weighted Average | |||||||||
Actual Allocation | Target Allocation | |||||||||
2008 | 2007 | 2009 | ||||||||
Asset Category | ||||||||||
Equity securities | 28 | % | 38 | % | 25% - 45% | |||||
Fixed maturity securities | 51 | 44 | 35% - 55% | |||||||
Other (Real estate and alternative investments) | 21 | 18 | 5% - 32% | |||||||
Total | 100 | % | 100 | % | ||||||
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December 31, | ||||||||||
Weighted Average | Weighted Average | |||||||||
Actual Allocation | Target Allocation | |||||||||
2008 | 2007 | 2009 | ||||||||
Asset Category | ||||||||||
Equity securities | 27 | % | 37 | % | 30% - 45% | |||||
Fixed maturity securities | 71 | 58 | 55% - 85% | |||||||
Other (Real estate and alternative investments) | 2 | 5 | 0% - 10% | |||||||
Total | 100 | % | 100 | % | ||||||
i) | Service Cost — Service cost is the increase in the projected pension benefit obligation resulting from benefits payable to employees of the Subsidiaries on service rendered during the current year. | |
ii) | Interest Cost on the Liability — Interest cost is the time value adjustment on the projected pension benefit obligation at the end of each year. | |
iii) | Expected Return on Plan Assets — Expected return on plan assets is the assumed return earned by the accumulated pension fund assets in a particular year. | |
iv) | Amortization of Prior Service Cost — This cost relates to the increase or decrease to pension benefit cost for service provided in prior years due to amendments in plans or initiation of new plans. As the economic benefits of these costs are realized in the future periods, these costs are amortized to pension expense over the expected service years of the employees. | |
v) | Amortization of Net Actuarial Gains or Losses — Actuarial gains and losses result from differences between the actual experience and the expected experience on pension plan assets or projected pension benefit obligation during a particular period. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the projected pension benefit obligation or the market-related value of plan assets, they are amortized into pension expense over the expected service years of the employees. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Service cost | $ | 164 | $ | 162 | $ | 159 | ||||||
Interest cost | 379 | 351 | 332 | |||||||||
Expected return on plan assets | (517 | ) | (505 | ) | (452 | ) | ||||||
Amortization of net actuarial (gains) losses | 24 | 68 | 128 | |||||||||
Amortization of prior service cost (credit) | 15 | 17 | 8 | |||||||||
Net periodic benefit cost | $ | 65 | $ | 93 | $ | 175 | ||||||
i) | Service Cost — Service cost is the increase in the expected postretirement plan benefit obligation resulting from benefits payable to employees of the Subsidiaries on service rendered during the current year. | |
ii) | Interest Cost on the Liability — Interest cost is the time value adjustment on the expected postretirement benefit obligation at the end of each year. | |
iii) | Expected Return on Plan Assets — Expected return on plan assets is the assumed return earned by the accumulated other postretirement fund assets in a particular year. |
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iv) | Amortization of Prior Service Cost — This cost relates to the increase or decrease to other postretirement benefit plan cost for service provided in prior years due to amendments in plans or initiation of new plans. As the economic benefits of these costs are realized in the future periods these costs are amortized to other postretirement benefit expense over the expected service years of the employees. | |
v) | Amortization of Net Actuarial Gains or Losses — Actuarial gains and losses result from differences between the actual experience and the expected experience on other postretirement benefit plan assets or expected postretirement plan benefit obligation during a particular year. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the accumulated postretirement plan benefit obligation or the market-related value of plan assets, they are amortized into other postretirement benefit expense over the expected service years of the employees. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Service cost | $ | 21 | $ | 27 | $ | 35 | ||||||
Interest cost | 103 | 103 | 116 | |||||||||
Expected return on plan assets | (86 | ) | (86 | ) | (79 | ) | ||||||
Amortization of net actuarial (gains) losses | (1 | ) | — | 22 | ||||||||
Amortization of prior service cost (credit) | (37 | ) | (36 | ) | (36 | ) | ||||||
Net periodic benefit cost | $ | — | $ | 8 | $ | 58 | ||||||
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Pension | ||||
Benefits | ||||
(In millions) | ||||
2009 | $ | 384 | ||
2010 | $ | 398 | ||
2011 | $ | 408 | ||
2012 | $ | 424 | ||
2013 | $ | 437 | ||
2014-2018 | $ | 2,416 |
Prescription | ||||||||||||
Gross | Drug Subsidies | Net | ||||||||||
(In millions) | ||||||||||||
2009 | $ | 135 | $ | (15 | ) | $ | 120 | |||||
2010 | $ | 140 | $ | (16 | ) | $ | 124 | |||||
2011 | $ | 146 | $ | (16 | ) | $ | 130 | |||||
2012 | $ | 150 | $ | (17 | ) | $ | 133 | |||||
2013 | $ | 154 | $ | (18 | ) | $ | 136 | |||||
2014-2018 | $ | 847 | $ | (107 | ) | $ | 740 |
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Other Assets: | ||||||||
Premium tax offset for future undiscounted assessments | $ | 50 | $ | 40 | ||||
Premium tax offsets currently available for paid assessments | 7 | 6 | ||||||
Receivable for reimbursement of paid assessments (1) | 7 | 7 | ||||||
$ | 64 | $ | 53 | |||||
Other Liabilities: | ||||||||
Insolvency assessments | $ | 83 | $ | 74 | ||||
(1) | The Company holds a receivable from the seller of a prior acquisition in accordance with the purchase agreement. |
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(i) | clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; |
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(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 QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. |
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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 estimated 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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• | All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. | |
• | Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
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• | credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest; | |
• | interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates; | |
• | liquidity risk, relating to the diminished ability to sell certain investments in times of strained market conditions; and | |
• | market valuation risk. |
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Fixed Maturity Securities | ||||||||||||
Yield (1) | 6.40 | % | 6.42 | % | 6.23 | % | ||||||
Investment income (2) | $ | 12,403 | $ | 12,425 | $ | 11,623 | ||||||
Investment gains (losses) | $ | (1,949 | ) | $ | (615 | ) | $ | (1,119 | ) | |||
Ending carrying value (2) | $ | 189,197 | $ | 233,115 | $ | 233,514 | ||||||
Mortgage and Consumer Loans | ||||||||||||
Yield (1) | 6.08 | % | 6.56 | % | 6.60 | % | ||||||
Investment income (3) | $ | 2,774 | $ | 2,648 | $ | 2,365 | ||||||
Investment gains (losses) | $ | (136 | ) | $ | 3 | $ | (8 | ) | ||||
Ending carrying value | $ | 51,364 | $ | 46,154 | $ | 41,457 | ||||||
Real Estate and Real Estate Joint Ventures (4) | ||||||||||||
Yield (1) | 2.98 | % | 10.29 | % | 11.43 | % | ||||||
Investment income | $ | 217 | $ | 607 | $ | 550 | ||||||
Investment gains (losses) | $ | (10 | ) | $ | 59 | $ | 4,897 | |||||
Ending carrying value | $ | 7,586 | $ | 6,767 | $ | 4,981 | ||||||
Policy Loans | ||||||||||||
Yield (1) | 6.22 | % | 6.21 | % | 6.02 | % | ||||||
Investment income | $ | 601 | $ | 572 | $ | 547 | ||||||
Ending carrying value | $ | 9,802 | $ | 9,326 | $ | 9,178 | ||||||
Equity Securities (7) | ||||||||||||
Yield (1) | 5.25 | % | 5.14 | % | 3.56 | % | ||||||
Investment income | $ | 249 | $ | 244 | $ | 106 | ||||||
Investment gains (losses) | $ | (257 | ) | $ | 164 | $ | 84 | |||||
Ending carrying value | $ | 3,197 | $ | 5,911 | $ | 4,929 | ||||||
Other Limited Partnership Interests (7) | ||||||||||||
Yield (1) | (2.77 | )% | 27.09 | % | 22.42 | % | ||||||
Investment income (loss) | $ | (170 | ) | $ | 1,309 | $ | 945 | |||||
Investment gains (losses) | $ | (140 | ) | $ | 16 | $ | 1 | |||||
Ending carrying value | $ | 6,039 | $ | 6,155 | $ | 4,781 | ||||||
Cash and Short-Term Investments | ||||||||||||
Yield (1) | 1.62 | % | 4.91 | % | 5.68 | % | ||||||
Investment income | $ | 307 | $ | 424 | $ | 437 | ||||||
Investment gains (losses) | $ | 3 | $ | 3 | $ | (2 | ) | |||||
Ending carrying value | $ | 38,085 | $ | 12,505 | $ | 9,472 | ||||||
Other Invested Assets (5),(6),(8) | ||||||||||||
Investment income | $ | 383 | $ | 526 | $ | 447 | ||||||
Investment gains (losses) | $ | 4,260 | $ | (474 | ) | $ | (736 | ) | ||||
Ending carrying value | $ | 17,248 | $ | 8,076 | $ | 6,524 | ||||||
Total Investments | ||||||||||||
Gross investment income yield (1) | 5.71 | % | 6.88 | % | 6.65 | % | ||||||
Investment fees and expenses yield | (0.16 | )% | (0.16 | )% | (0.15 | )% | ||||||
Net Investment Income Yield | 5.55 | % | 6.72 | % | 6.50 | % | ||||||
Gross investment income | $ | 16,764 | $ | 18,755 | $ | 17,020 | ||||||
Investment fees and expenses | (460 | ) | (427 | ) | (391 | ) | ||||||
Net Investment Income | $ | 16,304 | $ | 18,328 | $ | 16,629 | ||||||
Ending carrying value | $ | 322,518 | $ | 328,009 | $ | 314,836 | ||||||
Gross investment gains | $ | 2,575 | $ | 1,386 | $ | 5,731 | ||||||
Gross investment losses (8) | (2,005 | ) | (1,710 | ) | (2,008 | ) | ||||||
Writedowns (8) | (2,042 | ) | (140 | ) | (134 | ) | ||||||
Subtotal | $ | (1,472 | ) | $ | (464 | ) | $ | 3,589 | ||||
Derivatives not qualifying for hedge accounting (8),(9) | 3,243 | (380 | ) | (472 | ) | |||||||
Investment Gains (Losses) | $ | 1,771 | $ | (844 | ) | $ | 3,117 | |||||
Investment gains (losses) income tax benefit (provision) | (671 | ) | 280 | (1,114 | ) | |||||||
Investment Gains (Losses), Net of Income Tax | $ | 1,100 | $ | (564 | ) | $ | 2,003 | |||||
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(1) | Yields are based on quarterly average asset carrying values, excluding recognized and unrealized investment gains (losses), and for yield calculation purposes, average assets exclude collateral received from counterparties associated with the Company’s securities lending program. | |
(2) | Fixed maturity securities include $946 million, $779 million and $759 million at estimated fair value related to trading securities at December 31, 2008, 2007 and 2006, respectively. Fixed maturity securities include ($193) million, $50 million and $71 million of investment income (loss) related to trading securities for the years ended December 31, 2008, 2007 and 2006, respectively. | |
(3) | Investment income from mortgage and consumer loans includes prepayment fees. | |
(4) | Included in net investment income from real estate and real estate joint ventures is $3 million, $12 million and $92 million related to discontinued operations for the years ended December 31, 2008, 2007 and 2006, respectively. Included in investment gains (losses) from real estate and real estate joint ventures is $8 million, $13 million and $4,795 million of gains related to discontinued operations for the years ended December 31, 2008, 2007 and 2006, respectively. | |
(5) | Included in investment income from other invested assets are scheduled periodic settlement payments on derivative instruments that do not qualify for hedge accounting under SFAS 133 of $5 million, $253 million and $290 million for the years ended December 31, 2008, 2007 and 2006, respectively. These amounts are excluded from investment gains (losses). Additionally, excluded from investment gains (losses) is $44 million, $25 million and $6 million for the years ended December 31, 2008, 2007 and 2006, respectively, related to settlement payments on derivatives used to hedge interest rate and currency risk on policyholder account balances that do not qualify for hedge accounting. Such amounts are included within interest credited to policyholder account balances. | |
(6) | Other invested assets are principally comprised of free standing derivatives with positive estimated fair values and leveraged leases. Freestanding derivatives with negative estimated fair values are included within other liabilities. As yield is not considered a meaningful measure of performance for other invested assets it has been excluded from the table above. | |
(7) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(8) | The components of investment gains (losses) for the year ended December 31, 2008 are shown net of a realized gain under purchased credit default swaps that offsets losses incurred on certain fixed maturity securities. | |
(9) | The caption “Derivatives not qualifying for hedge accounting” is comprised of amounts for freestanding derivatives of $5,893 million, ($59) million, and ($674) million; and embedded derivatives of ($2,650) million, ($321) million, and $202 million for the years ended December 31, 2008, 2007 and 2006, respectively. |
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Investment Outlook |
Year Ended December 31, 2007 compared with the Year Ended December 31, 2006 |
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||
Cost or | Cost or | |||||||||||||||||||||||||
Amortized | Estimated | % of | Amortized | Estimated | % of | |||||||||||||||||||||
NAIC Rating | Rating Agency Designation (1) | Cost | Fair Value | Total | Cost | Fair Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
1 | Aaa/Aa/A | $ | 146,796 | $ | 137,125 | 72.9 | % | $ | 165,328 | $ | 167,761 | 72.2 | % | |||||||||||||
2 | Baa | 45,253 | 38,761 | 20.6 | 46,520 | 47,172 | 20.3 | |||||||||||||||||||
3 | Ba | 10,258 | 7,796 | 4.1 | 10,463 | 10,528 | 4.5 | |||||||||||||||||||
4 | B | 5,915 | 3,779 | 2.0 | 6,583 | 6,435 | 2.8 | |||||||||||||||||||
5 | Caa and lower | 1,192 | 715 | 0.4 | 459 | 428 | 0.2 | |||||||||||||||||||
6 | In or near default | 94 | 75 | — | 1 | 12 | — | |||||||||||||||||||
Total fixed maturity securities | $ | 209,508 | $ | 188,251 | 100.0 | % | $ | 229,354 | $ | 232,336 | 100.0 | % | ||||||||||||||
(1) | Amounts presented are based on rating agency designations. Comparisons between NAIC ratings and rating agency designations are published by the NAIC. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. |
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December 31, 2008 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 72,211 | $ | 994 | $ | 9,902 | $ | 63,303 | 33.6 | % | ||||||||||
Residential mortgage-backed securities | 39,995 | 753 | 4,720 | 36,028 | 19.2 | |||||||||||||||
Foreign corporate securities | 34,798 | 565 | 5,684 | 29,679 | 15.8 | |||||||||||||||
U.S. Treasury/agency securities | 17,229 | 4,082 | 1 | 21,310 | 11.3 | |||||||||||||||
Commercial mortgage-backed securities | 16,079 | 18 | 3,453 | 12,644 | 6.7 | |||||||||||||||
Asset-backed securities | 14,246 | 16 | 3,739 | 10,523 | 5.6 | |||||||||||||||
Foreign government securities | 9,474 | 1,056 | 377 | 10,153 | 5.4 | |||||||||||||||
State and political subdivision securities | 5,419 | 80 | 942 | 4,557 | 2.4 | |||||||||||||||
Other fixed maturity securities | 57 | — | 3 | 54 | — | |||||||||||||||
Total fixed maturity securities (2),(3) | $ | 209,508 | $ | 7,564 | $ | 28,821 | $ | 188,251 | 100.0 | % | ||||||||||
Common stock | $ | 1,778 | $ | 40 | $ | 133 | $ | 1,685 | 52.7 | % | ||||||||||
Non-redeemable preferred stock (2) | 2,353 | 4 | 845 | 1,512 | 47.3 | |||||||||||||||
Total equity securities (1) | $ | 4,131 | $ | 44 | $ | 978 | $ | 3,197 | 100.0 | % | ||||||||||
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December 31, 2007 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 74,310 | $ | 1,685 | $ | 2,076 | $ | 73,919 | 31.8 | % | ||||||||||
Residential mortgage-backed securities | 54,773 | 598 | 376 | 54,995 | 23.7 | |||||||||||||||
Foreign corporate securities | 36,232 | 1,701 | 767 | 37,166 | 16.0 | |||||||||||||||
U.S. Treasury/agency securities | 19,723 | 1,482 | 13 | 21,192 | 9.1 | |||||||||||||||
Commercial mortgage-backed securities | 16,946 | 241 | 194 | 16,993 | 7.3 | |||||||||||||||
Asset-backed securities | 11,048 | 40 | 516 | 10,572 | 4.6 | |||||||||||||||
Foreign government securities | 11,645 | 1,350 | 182 | 12,813 | 5.5 | |||||||||||||||
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 (2),(3) | $ | 229,354 | $ | 7,250 | $ | 4,268 | $ | 232,336 | 100.0 | % | ||||||||||
Common stock | $ | 2,477 | $ | 568 | $ | 108 | $ | 2,937 | 49.7 | % | ||||||||||
Non-redeemable preferred stock (2) | 3,255 | 60 | 341 | 2,974 | 50.3 | |||||||||||||||
Total equity securities (1) | $ | 5,732 | $ | 628 | $ | 449 | $ | 5,911 | 100.0 | % | ||||||||||
(1) | Equity securities primarily consist of investments in common and preferred stocks and mutual fund interests. Such securities include common stock of privately held companies with an estimated fair value of $1.1 billion and $569 million at December 31, 2008 and 2007, respectively. | |
(2) | The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as “perpetual hybrid securities.” Perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at December 31, 2008 and 2007 had an estimated fair value of $1,224 million and $2,051 million respectively. In addition, the Company held $288 million and $923 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at December 31, 2008 and 2007 had an estimated fair value of $2,110 million and $3,896 million, respectively. In addition, the Company held $46 million and $57 million at estimated fair values, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, included in fixed maturity securities. | |
(3) | At December 31, 2008 and 2007 the Company also held $2,052 million and $3,432 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates which are included within fixed maturity securities. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as “capital securities” within U.S. corporate securities. |
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December 31, 2008 | ||||||||||||||||
Fixed Maturity | Equity | |||||||||||||||
Securities | Securities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 10,414 | 5.5 | % | $ | 413 | 12.9 | % | ||||||||
Independent pricing source | 133,620 | 71.0 | 402 | 12.6 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 26,809 | 14.2 | 1,003 | 31.4 | ||||||||||||
Significant other observable inputs (Level 2) | 160,429 | 85.2 | 1,405 | 44.0 | ||||||||||||
Independent pricing source | 7,423 | 3.9 | 779 | 24.4 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 7,443 | 4.0 | 397 | 12.4 | ||||||||||||
Independent broker quotations | 2,542 | 1.4 | 203 | 6.3 | ||||||||||||
Significant unobservable inputs (Level 3) | 17,408 | 9.3 | 1,379 | 43.1 | ||||||||||||
Total estimated fair value | $ | 188,251 | 100.0 | % | $ | 3,197 | 100.0 | % | ||||||||
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December 31, 2008 | ||||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | Total | |||||||||||||
Identical Assets | Inputs | Inputs | Estimated | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 55,805 | $ | 7,498 | $ | 63,303 | ||||||||
Residential mortgage-backed securities | — | 35,433 | 595 | 36,028 | ||||||||||||
Foreign corporate securities | — | 23,735 | 5,944 | 29,679 | ||||||||||||
U.S. Treasury/agency securities | 10,132 | 11,090 | 88 | 21,310 | ||||||||||||
Commercial mortgage-backed securities | — | 12,384 | 260 | 12,644 | ||||||||||||
Asset-backed securities | — | 8,071 | 2,452 | 10,523 | ||||||||||||
Foreign government securities | 282 | 9,463 | 408 | 10,153 | ||||||||||||
State and political subdivision securities | — | 4,434 | 123 | 4,557 | ||||||||||||
Other fixed maturity securities | — | 14 | 40 | 54 | ||||||||||||
Total fixed maturity securities | $ | 10,414 | $ | 160,429 | $ | 17,408 | $ | 188,251 | ||||||||
Equity securities: | ||||||||||||||||
Common stock | $ | 413 | $ | 1,167 | $ | 105 | $ | 1,685 | ||||||||
Non-redeemable preferred stock | — | 238 | 1,274 | 1,512 | ||||||||||||
Total equity securities | $ | 413 | $ | 1,405 | $ | 1,379 | $ | 3,197 | ||||||||
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Year Ended | ||||||||
December 31, 2008 | ||||||||
Fixed Maturity | Equity | |||||||
Securities | Securities | |||||||
(In millions) | ||||||||
Balance, December 31, 2007 | $ | 23,326 | $ | 2,371 | ||||
Impact of SFAS 157 and SFAS 159 adoption | (8 | ) | — | |||||
Balance, beginning of period | 23,318 | 2,371 | ||||||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | (881 | ) | (197 | ) | ||||
Other comprehensive income (loss) | (6,272 | ) | (478 | ) | ||||
Purchases, sales, issuances and settlements | (596 | ) | (288 | ) | ||||
Transfer in and/or out of Level 3 | 1,839 | (29 | ) | |||||
Balance, end of period | $ | 17,408 | $ | 1,379 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | (21,246 | ) | $ | 3,479 | $ | 5,075 | |||||
Equity securities | (934 | ) | 159 | 541 | ||||||||
Derivatives | (2 | ) | (373 | ) | (208 | ) | ||||||
Minority interest | (10 | ) | (150 | ) | (159 | ) | ||||||
Other | 53 | 3 | 9 | |||||||||
Subtotal | (22,139 | ) | 3,118 | 5,258 | ||||||||
Amounts allocated from: | ||||||||||||
Insurance liability loss recognition | 42 | (608 | ) | (1,149 | ) | |||||||
DAC and VOBA | 3,025 | (327 | ) | (189 | ) | |||||||
Policyholder dividend obligation | — | (789 | ) | (1,062 | ) | |||||||
Subtotal | 3,067 | (1,724 | ) | (2,400 | ) | |||||||
Deferred income tax | 6,508 | (423 | ) | (994 | ) | |||||||
Subtotal | 9,575 | (2,147 | ) | (3,394 | ) | |||||||
Net unrealized investment gains (losses) | $ | (12,564 | ) | $ | 971 | $ | 1,864 | |||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance, end of prior period | $ | 971 | $ | 1,864 | $ | 1,942 | ||||||
Cumulative effect of change in accounting principles, net of income tax | (10 | ) | — | — | ||||||||
Balance, beginning of period | 961 | 1,864 | 1,942 | |||||||||
Unrealized investment gains (losses) during the year | (25,377 | ) | (2,140 | ) | (706 | ) | ||||||
Unrealized investment losses of subsidiaries at the date of disposal | 130 | — | — | |||||||||
Unrealized investment gains (losses) relating to: | ||||||||||||
Insurance liability gain (loss) recognition | 650 | 541 | 261 | |||||||||
DAC and VOBA | 3,370 | (138 | ) | (110 | ) | |||||||
DAC and VOBA of subsidiaries at date of disposal | (18 | ) | — | — | ||||||||
Policyholder dividend obligation | 789 | 273 | 430 | |||||||||
Deferred income tax | 6,991 | 571 | 47 | |||||||||
Deferred income tax of subsidiaries at date of disposal | (60 | ) | — | — | ||||||||
Balance, end of period | $ | (12,564 | ) | $ | 971 | $ | 1,864 | |||||
Change in net unrealized investment gains (losses) | $ | (13,525 | ) | $ | (893 | ) | $ | (78 | ) | |||
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December 31, 2008 | ||||||||||||||||||||||||
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) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 32,658 | $ | 48,114 | $ | 2,358 | $ | 17,191 | 4,566 | 2,827 | ||||||||||||||
Six months or greater but less than nine months | 14,975 | 2,180 | 1,313 | 1,109 | 1,314 | 157 | ||||||||||||||||||
Nine months or greater but less than twelve months | 16,372 | 3,700 | 1,830 | 2,072 | 934 | 260 | ||||||||||||||||||
Twelve months or greater | 23,191 | 650 | 2,533 | 415 | 1,809 | 102 | ||||||||||||||||||
Total | $ | 87,196 | $ | 54,644 | $ | 8,034 | $ | 20,787 | ||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 386 | $ | 1,190 | $ | 58 | $ | 519 | 351 | 551 | ||||||||||||||
Six months or greater but less than nine months | 33 | 413 | 6 | 190 | 8 | 32 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3 | 487 | — | 194 | 5 | 15 | ||||||||||||||||||
Twelve months or greater | 171 | — | 11 | — | 20 | — | ||||||||||||||||||
Total | $ | 593 | $ | 2,090 | $ | 75 | $ | 903 | ||||||||||||||||
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) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 46,343 | $ | 1,375 | $ | 1,482 | $ | 383 | 4,713 | 148 | ||||||||||||||
Six months or greater but less than nine months | 15,833 | 14 | 730 | 4 | 1,028 | 24 | ||||||||||||||||||
Nine months or greater but less than twelve months | 8,529 | 7 | 492 | 2 | 586 | — | ||||||||||||||||||
Twelve months or greater | 29,893 | 50 | 1,162 | 13 | 2,692 | 32 | ||||||||||||||||||
Total | $ | 100,598 | $ | 1,446 | $ | 3,866 | $ | 402 | ||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 1,757 | $ | 423 | $ | 148 | $ | 133 | 1,212 | 417 | ||||||||||||||
Six months or greater but less than nine months | 528 | — | 62 | — | 154 | — | ||||||||||||||||||
Nine months or greater but less than twelve months | 439 | — | 54 | — | 62 | 1 | ||||||||||||||||||
Twelve months or greater | 511 | — | 52 | — | 90 | — | ||||||||||||||||||
Total | $ | 3,235 | $ | 423 | $ | 316 | $ | 133 | ||||||||||||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
Sector: | ||||||||
U.S. corporate securities | 33 | % | 44 | % | ||||
Foreign corporate securities | 19 | 16 | ||||||
Residential mortgage-backed securities | 16 | 8 | ||||||
Asset-backed securities | 13 | 11 | ||||||
Commercial mortgage-backed securities | 11 | 4 | ||||||
State and political subdivision securities | 3 | 2 | ||||||
Foreign government securities | 1 | 4 | ||||||
Other | 4 | 11 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 27 | % | 12 | % | ||||
Finance | 24 | 33 | ||||||
Asset-backed | 13 | 11 | ||||||
Consumer | 11 | 3 | ||||||
Utility | 8 | 8 | ||||||
Communication | 5 | 2 | ||||||
Industrial | 4 | 19 | ||||||
Foreign government | 1 | 4 | ||||||
Other | 7 | 8 | ||||||
Total | 100 | % | 100 | % | ||||
Writedowns. |
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Proceeds | $ | 62,495 | $ | 78,001 | $ | 86,725 | $ | 2,107 | $ | 1,112 | $ | 845 | $ | 64,602 | $ | 79,113 | $ | 87,570 | ||||||||||||||||||
Gross investment gains | 858 | 554 | 421 | 436 | 226 | 130 | 1,294 | 780 | 551 | |||||||||||||||||||||||||||
Gross investment losses | (1,511 | ) | (1,091 | ) | (1,484 | ) | (263 | ) | (43 | ) | (22 | ) | (1,774 | ) | (1,134 | ) | (1,506 | ) | ||||||||||||||||||
Writedowns | ||||||||||||||||||||||||||||||||||||
Credit-related | (1,138 | ) | (58 | ) | (56 | ) | (90 | ) | (19 | ) | (24 | ) | (1,228 | ) | (77 | ) | (80 | ) | ||||||||||||||||||
Other than credit-related (1) | (158 | ) | (20 | ) | — | (340 | ) | — | — | (498 | ) | (20 | ) | — | ||||||||||||||||||||||
Total writedowns | (1,296 | ) | (78 | ) | (56 | ) | (430 | ) | (19 | ) | (24 | ) | (1,726 | ) | (97 | ) | (80 | ) | ||||||||||||||||||
Net investment gains (losses) | $ | (1,949 | ) | $ | (615 | ) | $ | (1,119 | ) | $ | (257 | ) | $ | 164 | $ | 84 | $ | (2,206 | ) | $ | (451 | ) | $ | (1,035 | ) | |||||||||||
(1) | Other than credit-related writedowns include items such as equity securities where the primary reason for the writedown was the severity and/or the duration of an unrealized loss position and fixed maturity securities where an interest-rate related writedown was taken. |
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• | Lehman —In connection with the filing on September 15, 2008 by Lehman of a Chapter 11 bankruptcy petition, the Company recorded in 2008, impairments totaling $372 million (i.e., $329 million fixed maturity securities and $43 million equity securities) as follows related to Lehman — $256 million of Lehman senior unsecured debt and subordinated debt, $73 million of debt instruments issued by a special-purpose entity backed by Lehman obligations, and $43 million of Lehman non-redeemable preferred securities. The Company has also made secured loans to affiliates of Lehman which are fully collateralized; accordingly, no impairment charge has been recorded. | |
• | Washington Mutual —In connection with the September 25, 2008 acquisition of Washington Mutual’s banking operation by JP Morgan Chase & Co. relating to the FDIC receivership of its bank subsidiaries, which transaction excluded the assumption of any senior unsecured debt, subordinated debt, and preferred securities of Washington Mutual and its bank subsidiaries, the Company recorded impairments in 2008, totaling $197 million (i.e., $125 million fixed maturity securities and $72 million equity securities) as follows — $125 million of Washington Mutual subordinated debt, $71 million of Washington Mutual non-redeemable preferred securities, and less than $1 million of Washington Mutual common stock holdings. These impairments were partially offset by a $17 million realized gain on credit default swaps purchased on Washington Mutual debt. | |
• | AIG —In connection with the September 23, 2008 definitive agreement between AIG and the Federal Reserve Bank of New York for a two-year revolving credit facility and issuance of preferred stock that |
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granted 79.9% common stock voting power to the United States Treasury, the Company recorded impairments on securities for the year ended December 31, 2008 totaling $37 million (i.e., $35 million fixed maturity securities and $2 million equity securities) as follows — $35 million of AIG unsecured subordinated debt holdings, and $2 million of AIG common stock. Additionally, a $2 million impairment was recorded on an AIG affiliate-managed other limited partnership investment for the year ended December 31, 2008, for a total AIG impairment of $37 million for the year ended December 31, 2008. |
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Foreign (1) | $ | 29,679 | 32.0 | % | $ | 37,166 | 33.4 | % | ||||||||
Finance | 14,996 | 16.1 | 20,639 | 18.6 | ||||||||||||
Industrial | 13,324 | 14.3 | 15,838 | 14.3 | ||||||||||||
Consumer | 13,122 | 14.1 | 15,793 | 14.2 | ||||||||||||
Utility | 12,434 | 13.4 | 13,206 | 11.9 | ||||||||||||
Communications | 5,714 | 6.1 | 7,679 | 6.9 | ||||||||||||
Other | 3,713 | 4.0 | 764 | 0.7 | ||||||||||||
Total | $ | 92,982 | 100.0 | % | $ | 111,085 | 100.0 | % | ||||||||
(1) | Includes U.S. dollar-denominated debt obligations of foreign obligors, and other fixed maturity foreign investments. |
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Collateralized mortgage obligations | $ | 26,025 | 44.0 | % | $ | 36,303 | 44.0 | % | ||||||||
Pass-through securities | 10,003 | 16.8 | 18,692 | 22.6 | ||||||||||||
Total residential mortgage-backed securities | 36,028 | 60.8 | 54,995 | 66.6 | ||||||||||||
Commercial mortgage-backed securities | 12,644 | 21.4 | 16,993 | 20.6 | ||||||||||||
Asset-backed securities | 10,523 | 17.8 | 10,572 | 12.8 | ||||||||||||
Total | $ | 59,195 | 100.0 | % | $ | 82,560 | 100.0 | % | ||||||||
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December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 96 | $ | 77 | $ | 92 | $ | 72 | $ | 26 | $ | 16 | $ | 83 | $ | 53 | $ | 8 | $ | 4 | $ | 305 | $ | 222 | ||||||||||||||||||||||||
2004 | 129 | 70 | 372 | 204 | 5 | 3 | 37 | 28 | 2 | 1 | 545 | 306 | ||||||||||||||||||||||||||||||||||||
2005 | 357 | 227 | 186 | 114 | 20 | 11 | 79 | 46 | 4 | 4 | 646 | 402 | ||||||||||||||||||||||||||||||||||||
2006 | 146 | 106 | 69 | 30 | 15 | 10 | 26 | 7 | 2 | 2 | 258 | 155 | ||||||||||||||||||||||||||||||||||||
2007 | — | — | 78 | 33 | 35 | 21 | 2 | 2 | 3 | 1 | 118 | 57 | ||||||||||||||||||||||||||||||||||||
2008 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 728 | $ | 480 | $ | 797 | $ | 453 | $ | 101 | $ | 61 | $ | 227 | $ | 136 | $ | 19 | $ | 12 | $ | 1,872 | $ | 1,142 | ||||||||||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 217 | $ | 206 | $ | 130 | $ | 123 | $ | 15 | $ | 14 | $ | 13 | $ | 12 | $ | 4 | $ | 2 | $ | 379 | $ | 357 | ||||||||||||||||||||||||
2004 | 186 | 169 | 412 | 383 | 11 | 9 | — | — | 1 | — | 610 | 561 | ||||||||||||||||||||||||||||||||||||
2005 | 509 | 462 | 218 | 197 | — | — | — | — | — | — | 727 | 659 | ||||||||||||||||||||||||||||||||||||
2006 | 244 | 223 | 64 | 43 | — | — | — | — | — | — | 308 | 266 | ||||||||||||||||||||||||||||||||||||
2007 | 132 | 123 | 17 | 9 | — | — | — | — | — | — | 149 | 132 | ||||||||||||||||||||||||||||||||||||
Total | $ | 1,288 | $ | 1,183 | $ | 841 | $ | 755 | $ | 26 | $ | 23 | $ | 13 | $ | 12 | $ | 5 | $ | 2 | $ | 2,173 | $ | 1,975 | ||||||||||||||||||||||||
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December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 5,428 | $ | 4,975 | $ | 424 | $ | 272 | $ | 213 | $ | 124 | $ | 51 | $ | 24 | $ | 42 | $ | 17 | $ | 6,158 | $ | 5,412 | ||||||||||||||||||||||||
2004 | 2,630 | 2,255 | 205 | 100 | 114 | 41 | 47 | 11 | 102 | 50 | 3,098 | 2,457 | ||||||||||||||||||||||||||||||||||||
2005 | 3,403 | 2,664 | 187 | 49 | 40 | 13 | 5 | 1 | 18 | 10 | 3,653 | 2,737 | ||||||||||||||||||||||||||||||||||||
2006 | 1,825 | 1,348 | 110 | 39 | 25 | 14 | 94 | 36 | — | — | 2,054 | 1,437 | ||||||||||||||||||||||||||||||||||||
2007 | 999 | 535 | 43 | 28 | 63 | 28 | 10 | 9 | — | — | 1,115 | 600 | ||||||||||||||||||||||||||||||||||||
2008 | 1 | 1 | — | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||||||||||||||
Total | $ | 14,286 | $ | 11,778 | $ | 969 | $ | 488 | $ | 455 | $ | 220 | $ | 207 | $ | 81 | $ | 162 | $ | 77 | $ | 16,079 | $ | 12,644 | ||||||||||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 5,442 | $ | 5,500 | $ | 504 | $ | 512 | $ | 339 | $ | 342 | $ | 94 | $ | 92 | $ | 42 | $ | 43 | $ | 6,421 | $ | 6,489 | ||||||||||||||||||||||||
2004 | 1,738 | 1,749 | 156 | 148 | 106 | 100 | 47 | 34 | 111 | 101 | 2,158 | 2,132 | ||||||||||||||||||||||||||||||||||||
2005 | 3,154 | 3,166 | 212 | 198 | 50 | 48 | 5 | 4 | 76 | 61 | 3,497 | 3,477 | ||||||||||||||||||||||||||||||||||||
2006 | 2,767 | 2,813 | 120 | 116 | 34 | 34 | 121 | 118 | 10 | 10 | 3,052 | 3,091 | ||||||||||||||||||||||||||||||||||||
2007 | 1,680 | 1,672 | 91 | 87 | 37 | 36 | 10 | 9 | — | — | 1,818 | 1,804 | ||||||||||||||||||||||||||||||||||||
Total | $ | 14,781 | $ | 14,900 | $ | 1,083 | $ | 1,061 | $ | 566 | $ | 560 | $ | 277 | $ | 257 | $ | 239 | $ | 215 | $ | 16,946 | $ | 16,993 | ||||||||||||||||||||||||
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December 31, 2008 | ||||||||
Cash Collateral | % of Total | |||||||
(In millions) | ||||||||
Open | $ | 5,118 | 22.0 | % | ||||
Less than thirty days | 14,711 | 63.1 | ||||||
Greater than thirty days to sixty days | 3,471 | 14.9 | ||||||
Total | $ | 23,300 | 100.0 | % | ||||
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December 31, 2008 | ||||||||||||||||
Trading | Trading | |||||||||||||||
Securities | Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 587 | 62 | % | $ | 57 | 100 | % | ||||||||
Significant other observable inputs (Level 2) | 184 | 19 | — | — | ||||||||||||
Significant unobservable inputs (Level 3) | 175 | 19 | — | — | ||||||||||||
Total estimated fair value | $ | 946 | 100 | % | $ | 57 | 100 | % | ||||||||
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Year Ended | ||||
December 31, 2008 | ||||
(In millions) | ||||
Balance, December 31, 2007 | $ | 183 | ||
Impact of SFAS 157 and SFAS 159 adoption | 8 | |||
Balance, beginning of period | 191 | |||
Total realized/unrealized gains (losses) included in: | ||||
Earnings | (26 | ) | ||
Other comprehensive income (loss) | — | |||
Purchases, sales, issuances and settlements | 18 | |||
Transfer in and/or out of Level 3 | (8 | ) | ||
Balance, end of period | $ | 175 | ||
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 35,965 | 70.1 | % | $ | 34,657 | 75.1 | % | ||||||||
Agricultural mortgage loans | 12,234 | 23.8 | 10,452 | 22.6 | ||||||||||||
Consumer loans | 1,153 | 2.2 | 1,040 | 2.3 | ||||||||||||
Loans held-for-investment | 49,352 | 96.1 | 46,149 | 100.0 | ||||||||||||
Mortgage loans held-for-sale | 2,012 | 3.9 | 5 | — | ||||||||||||
Total | $ | 51,364 | 100.0 | % | $ | 46,154 | 100.0 | % | ||||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Region | ||||||||||||||||
Pacific | $ | 8,837 | 24.6 | % | $ | 8,436 | 24.4 | % | ||||||||
South Atlantic | 8,101 | 22.5 | 7,770 | 22.4 | ||||||||||||
Middle Atlantic | 5,931 | 16.5 | 5,042 | 14.5 | ||||||||||||
International | 3,414 | 9.5 | 3,642 | 10.5 | ||||||||||||
West South Central | 3,070 | 8.5 | 2,888 | 8.3 | ||||||||||||
East North Central | 2,591 | 7.2 | 2,866 | 8.3 | ||||||||||||
New England | 1,529 | 4.3 | 1,464 | 4.2 | ||||||||||||
Mountain | 1,052 | 2.9 | 1,002 | 2.9 | ||||||||||||
West North Central | 716 | 2.0 | 974 | 2.8 | ||||||||||||
East South Central | 468 | 1.3 | 481 | 1.4 | ||||||||||||
Other | 256 | 0.7 | 92 | 0.3 | ||||||||||||
Total | $ | 35,965 | 100.0 | % | $ | 34,657 | 100.0 | % | ||||||||
Property Type | ||||||||||||||||
Office | $ | 15,307 | 42.6 | % | $ | 15,216 | 43.9 | % | ||||||||
Retail | 8,038 | 22.3 | 7,334 | 21.1 | ||||||||||||
Apartments | 4,113 | 11.4 | 4,368 | 12.6 | ||||||||||||
Hotel | 3,078 | 8.6 | 3,258 | 9.4 | ||||||||||||
Industrial | 2,901 | 8.1 | 2,622 | 7.6 | ||||||||||||
Other | 2,528 | 7.0 | 1,859 | 5.4 | ||||||||||||
Total | $ | 35,965 | 100.0 | % | $ | 34,657 | 100.0 | % | ||||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||
Performing | $ | 36,192 | 100.0 | % | $ | 232 | 0.6 | % | $ | 34,820 | 100.0 | % | $ | 167 | 0.5 | % | ||||||||||||||||||
Restructured | — | — | — | — | % | — | — | — | — | % | ||||||||||||||||||||||||
Potentially delinquent | 2 | — | — | — | % | 3 | — | — | — | % | ||||||||||||||||||||||||
Delinquent or under foreclosure | 3 | — | — | — | % | 1 | — | — | — | % | ||||||||||||||||||||||||
Total | $ | 36,197 | 100.0 | % | $ | 232 | 0.6 | % | $ | 34,824 | 100.0 | % | $ | 167 | 0.5 | % | ||||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 167 | $ | 153 | 147 | |||||||
Additions | 145 | 68 | 25 | |||||||||
Deductions | (80 | ) | (54 | ) | (19 | ) | ||||||
Balance, end of period | $ | 232 | $ | 167 | $ | 153 | ||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||
Performing | $ | 12,054 | 98.0 | % | $ | 16 | 0.1 | % | $ | 10,409 | 99.4 | % | $ | 12 | 0.1 | % | ||||||||||||||||||
Restructured | 1 | — | — | — | % | 2 | — | — | — | % | ||||||||||||||||||||||||
Potentially delinquent | 133 | 1.1 | 18 | 13.5 | % | 46 | 0.4 | 4 | 8.7 | % | ||||||||||||||||||||||||
Delinquent or under foreclosure | 107 | 0.9 | 27 | 25.2 | % | 19 | 0.2 | 8 | 42.1 | % | ||||||||||||||||||||||||
Total | $ | 12,295 | 100.0 | % | $ | 61 | 0.5 | % | $ | 10,476 | 100.0 | % | $ | 24 | 0.2 | % | ||||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 24 | $ | 18 | $ | 11 | ||||||
Additions | 49 | 8 | 10 | |||||||||
Deductions | (12 | ) | (2 | ) | (3 | ) | ||||||
Balance, end of period | $ | 61 | $ | 24 | $ | 18 | ||||||
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||
Performing | $ | 1,116 | 95.8 | % | $ | 11 | 1.0 | % | $ | 1,001 | 95.7 | % | $ | 5 | 0.5 | % | ||||||||||||||||||
Restructured | — | — | — | — | % | — | — | — | — | % | ||||||||||||||||||||||||
Potentially delinquent | 17 | 1.5 | — | — | % | 19 | 1.8 | — | — | % | ||||||||||||||||||||||||
Delinquent or under foreclosure | 31 | 2.7 | — | — | % | 26 | 2.5 | 1 | 4.0 | % | ||||||||||||||||||||||||
Total | $ | 1,164 | 100.0 | % | $ | 11 | 0.9 | % | $ | 1,046 | 100.0 | % | $ | 6 | 0.6 | % | ||||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 6 | $ | 11 | $ | 14 | ||||||
Additions | 6 | — | 1 | |||||||||
Deductions | (1 | ) | (5 | ) | (4 | ) | ||||||
Balance, end of period | $ | 11 | $ | 6 | $ | 11 | ||||||
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Real estate | $ | 4,061 | 53.5 | % | $ | 3,954 | 58.4 | % | ||||||||
Real estate joint ventures | 3,522 | 46.5 | 2,771 | 41.0 | ||||||||||||
Foreclosed real estate | 2 | — | 3 | — | ||||||||||||
7,585 | 100.0 | 6,728 | 99.4 | |||||||||||||
Real estate held-for-sale | 1 | — | 39 | 0.6 | ||||||||||||
Total real estate holdings | $ | 7,586 | 100.0 | % | $ | 6,767 | 100.0 | % | ||||||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Office | $ | 3,489 | 46 | % | $ | 3,480 | 51 | % | ||||||||
Apartments | 1,602 | 21 | 1,148 | 17 | ||||||||||||
Real estate investment funds | 1,080 | 14 | 950 | 14 | ||||||||||||
Industrial | 483 | 7 | 443 | 7 | ||||||||||||
Retail | 472 | 6 | 455 | 7 | ||||||||||||
Hotel | 180 | 3 | 60 | 1 | ||||||||||||
Land | 155 | 2 | 125 | 2 | ||||||||||||
Agriculture | 24 | — | 29 | — | ||||||||||||
Other | 101 | 1 | 77 | 1 | ||||||||||||
Total real estate holdings | $ | 7,586 | 100 | % | $ | 6,767 | 100 | % | ||||||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Freestanding derivatives with positive fair values | $ | 12,306 | 71.3 | % | $ | 4,036 | 50.0 | % | ||||||||
Leveraged leases, net of non-recourse debt | 2,146 | 12.4 | 2,059 | 25.5 | ||||||||||||
Joint venture investments | 751 | 4.4 | 622 | 7.7 | ||||||||||||
Tax credit partnerships | 503 | 2.9 | — | — | ||||||||||||
Funding agreements | 394 | 2.3 | 383 | 4.7 | ||||||||||||
Mortgage servicing rights | 191 | 1.1 | — | — | ||||||||||||
Funds withheld | 62 | 0.4 | 80 | 1.0 | ||||||||||||
Other | 895 | 5.2 | 896 | 11.1 | ||||||||||||
Total | $ | 17,248 | 100.0 | % | $ | 8,076 | 100.0 | % | ||||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Rental receivables, net | $ | 1,486 | $ | 1,491 | ||||
Estimated residual values | 1,913 | 1,881 | ||||||
Subtotal | 3,399 | 3,372 | ||||||
Unearned income | (1,253 | ) | (1,313 | ) | ||||
Investment in leveraged leases | $ | 2,146 | $ | 2,059 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Income from investment in leveraged leases (included in net investment income) | $ | 116 | $ | 68 | $ | 55 | ||||||
Less: Income tax expense on leveraged leases | (40 | ) | (24 | ) | (18 | ) | ||||||
Net income from investment in leveraged leases | $ | 76 | $ | 44 | $ | 37 | ||||||
Carrying Value | ||||||||
(In millions) | ||||||||
Fair value on December 31, 2007 | $ | — | ||||||
Acquisition of mortgage servicing rights | 350 | |||||||
Reduction due to loan payments | (10 | ) | ||||||
Reduction due to sales | — | |||||||
Changes in fair value due to: | ||||||||
Changes in valuation model inputs or assumptions | (149 | ) | ||||||
Other changes in fair value | — | |||||||
Fair value on December 31, 2008 | $ | 191 | ||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||
Notional | or Fair Value | Notional | or Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 34,060 | $ | 4,617 | $ | 1,468 | $ | 62,410 | $ | 784 | $ | 768 | ||||||||||||
Interest rate floors | 48,517 | 1,748 | — | 48,937 | 621 | — | ||||||||||||||||||
Interest rate caps | 24,643 | 11 | — | 45,498 | 50 | — | ||||||||||||||||||
Financial futures | 19,908 | 45 | 205 | 12,302 | 89 | 57 | ||||||||||||||||||
Foreign currency swaps | 19,438 | 1,953 | 1,866 | 21,201 | 1,480 | 1,719 | ||||||||||||||||||
Foreign currency forwards | 5,167 | 153 | 129 | 4,177 | 76 | 16 | ||||||||||||||||||
Options | 8,450 | 3,162 | 35 | 6,565 | 713 | 1 | ||||||||||||||||||
Financial forwards | 28,176 | 465 | 169 | 11,937 | 122 | 2 | ||||||||||||||||||
Credit default swaps | 5,219 | 152 | 69 | 6,625 | 58 | 33 | ||||||||||||||||||
Synthetic GICs | 4,260 | — | — | 3,670 | — | — | ||||||||||||||||||
Other | 250 | — | 101 | 250 | 43 | — | ||||||||||||||||||
Total | $ | 198,088 | $ | 12,306 | $ | 4,042 | $ | 223,572 | $ | 4,036 | $ | 2,596 | ||||||||||||
December 31, 2008 | ||||||||||||||||
Derivative | Derivative | |||||||||||||||
Assets | Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 55 | — | % | 273 | 7 | % | |||||||||
Significant other observable inputs (Level 2) | 9,483 | 77 | 3,548 | 88 | ||||||||||||
Significant unobservable inputs (Level 3) | 2,768 | 23 | 221 | 5 | ||||||||||||
Total estimated fair value | $ | 12,306 | 100 | % | $ | 4,042 | 100 | % | ||||||||
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Year Ended | ||||
December 31, 2008 | ||||
(In millions) | ||||
Balance, December 31, 2007 | $ | 789 | ||
Impact of SFAS 157 and SFAS 159 adoption | (1 | ) | ||
Balance, beginning of period | 788 | |||
Total realized/unrealized gains (losses) included in: | ||||
Earnings | 1,729 | |||
Other comprehensive income (loss) | — | |||
Purchases, sales, issuances and settlements | 29 | |||
Transfer in and/or out of Level 3 | 1 | |||
Balance, end of period | $ | 2,547 | ||
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December 31, 2008 | ||||||||||||||||||||
Net Embedded Derivatives Within | ||||||||||||||||||||
Asset Host Contracts | Liability Host Contracts | |||||||||||||||||||
(In millions) | ||||||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | — | — | % | $ | — | — | % | ||||||||||||
Significant other observable inputs (Level 2) | — | — | (83 | ) | (3 | ) | ||||||||||||||
Significant unobservable inputs (Level 3) | 205 | 100 | 3,134 | 103 | ||||||||||||||||
Total estimated fair value | $ | 205 | 100 | % | $ | 3,051 | 100 | % | ||||||||||||
Year Ended | ||||
December 31, 2008 | ||||
(In millions) | ||||
Balance, December 31, 2007 | $ | (278 | ) | |
Impact of SFAS 157 and SFAS 159 adoption | 24 | |||
Balance, beginning of period | (254 | ) | ||
Total realized/unrealized gains (losses) included in: | ||||
Earnings | (2,500 | ) | ||
Other comprehensive income (loss) | (81 | ) | ||
Purchases, sales, issuances and settlements | (94 | ) | ||
Transfer in and/or out of Level 3 | — | |||
Balance, end of period | $ | (2,929 | ) | |
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December 31, 2008 | ||||||||
Total Assets | Total Liabilities | |||||||
(In millions) | ||||||||
MRSC collateral financing arrangement (1) | $ | 2,361 | $ | — | ||||
Real estate joint ventures (2) | 26 | 15 | ||||||
Other limited partnership interests (3) | 20 | 3 | ||||||
Other invested assets (4) | 10 | 3 | ||||||
Total | $ | 2,417 | $ | 21 | ||||
(1) | These assets are reflected at estimated fair value, and consist of fixed maturity securities available-for-sale of $2,137 million and cash and cash equivalents of $224 million, of which $60 million is cashheld-in-trust. Included within fixed maturity securities available-for-sale are $948 million of U.S. corporate securities, $561 million of residential mortgage-backed securities, $409 million of asset-backed securities, $98 million of commercial mortgage-backed securities, $95 million of foreign corporate securities, $21 million of state and political subdivision securities and $5 million of foreign government securities. | |
(2) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets consist of $20 million of real estate and real estate joint ventures held-for-investment, $5 million of cash and cash equivalents and $1 million of other assets. The liabilities of $15 million are included within other liabilities. | |
(3) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets of $20 million are included within other limited partnership interests, while the liabilities of $3 million are included within other liabilities. | |
(4) | Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets of $10 million are included within other invested assets. The liabilities consist of $2 million of long-term debt and $1 million of other liabilities. |
December 31, 2008 | ||||||||
Carrying | Maximum | |||||||
Amount (1) | Exposure to Loss (2) | |||||||
(In millions) | ||||||||
Fixed maturity securities available-for-sale: | ||||||||
Foreign corporate securities | $ | 1,080 | $ | 1,080 | ||||
U.S. Treasury/agency securities | 992 | 992 | ||||||
Real estate joint ventures | 32 | 32 | ||||||
Other limited partnership interests | 3,496 | 4,004 | ||||||
Other invested assets | 318 | 108 | ||||||
Total | $ | 5,918 | $ | 6,216 | ||||
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(1) | See Note 1 of the Notes to the Consolidated Financial Statements for further discussion of the Company’s significant accounting policies with regards to the carrying amounts of these investments. | |
(2) | The maximum exposure to loss relating to the fixed maturity securities available-for-sale and equity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company’s return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by third parties. |
• | such separate accounts are legally recognized; | |
• | assets supporting the contract liabilities are legally insulated from the Company’s general account liabilities; | |
• | investments are directed by the contractholder; and | |
• | all investment performance, net of contract fees and assessments, is passed through to the contractholder. |
December 31, 2008 | ||||||||
(In millions) | ||||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 85,886 | 71.0 | % | ||||
Significant other observable inputs (Level 2) | 33,195 | 27.5 | ||||||
Significant unobservable inputs (Level 3) | 1,758 | 1.5 | ||||||
Total estimated fair value | $ | 120,839 | 100.0 | % | ||||
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Future Policy Benefits | Policyholder Account Balances | Other Policyholder Funds | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||
Group life | $ | 3,346 | $ | 3,326 | $ | 14,044 | $ | 13,997 | $ | 2,532 | $ | 2,364 | ||||||||||||
Retirement & savings | 40,320 | 37,947 | 60,787 | 51,585 | 58 | 213 | ||||||||||||||||||
Non-medical health & other | 11,619 | 10,617 | 501 | 501 | 609 | 597 | ||||||||||||||||||
Individual | ||||||||||||||||||||||||
Traditional life | 52,968 | 52,378 | 1 | 1 | 1,423 | 1,478 | ||||||||||||||||||
Variable & universal life | 1,129 | 949 | 15,062 | 14,583 | 1,452 | 1,417 | ||||||||||||||||||
Annuities | 3,655 | 3,055 | 44,282 | 37,785 | 88 | 76 | ||||||||||||||||||
Other | 2 | — | 2,524 | 2,398 | 1 | 1 | ||||||||||||||||||
International | 9,241 | 9,825 | 5,654 | 4,961 | 1,227 | 1,296 | ||||||||||||||||||
Auto & Home | 3,083 | 3,273 | — | — | 43 | 51 | ||||||||||||||||||
Corporate & Other | 5,192 | 4,646 | 6,950 | 4,531 | 329 | 345 | ||||||||||||||||||
Total | $ | 130,555 | $ | 126,016 | $ | 149,805 | $ | 130,342 | $ | 7,762 | $ | 7,838 | ||||||||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Individual: | ||||||||
Guaranteed minimum accumulation benefit | $ | 169 | $ | 29 | ||||
Guaranteed minimum withdrawal benefit | 750 | 80 | ||||||
Guaranteed minimum income benefit | 1,043 | 78 | ||||||
International: | ||||||||
Guaranteed minimum accumulation benefit | 271 | 7 | ||||||
Guaranteed minimum withdrawal benefit | 901 | 90 | ||||||
Total | $ | 3,134 | $ | 284 | ||||
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December 31, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 5,572 | $ | 632 | $ | 7 | $ | 998 | $ | 32 | $ | 2 | ||||||||||||
Financial futures | 13,924 | 37 | 121 | 4,039 | 51 | 14 | ||||||||||||||||||
Foreign currency forwards | 1,017 | 49 | 4 | 489 | 3 | — | ||||||||||||||||||
Options | 5,424 | 2,065 | — | 4,906 | 554 | 1 | ||||||||||||||||||
Financial forwards | 8,835 | 396 | — | 5,309 | 46 | 1 | ||||||||||||||||||
Total | $ | 34,772 | $ | 3,179 | $ | 132 | $ | 15,741 | $ | 686 | $ | 18 | ||||||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Individual: | ||||||||
Guaranteed minimum death benefit | $ | 204 | $ | 72 | ||||
Guaranteed minimum income benefit | 403 | 74 | ||||||
International: | ||||||||
Guaranteed minimum death benefit | 39 | 2 | ||||||
Total | $ | 646 | $ | 148 | ||||
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
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• | implementing a Board of Directors approved corporate risk framework, which outlines the Company’s approach for managing risk on an enterprise-wide basis; | |
• | developing policies and procedures for managing, measuring, monitoring and controlling those risks identified in the corporate risk framework; | |
• | establishing appropriate corporate risk tolerance levels; | |
• | deploying capital on an economic capital basis; and | |
• | reporting on a periodic basis to the Finance and Risk Policy Committee of the Company’s Board of Directors, and with respect to credit risk to the Investment Committee of the Company’s Board of Directors and various financial and non-financial senior management committees. |
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• | The Company’s Treasury Department is responsible for managing the exposure to investments in foreign subsidiaries. Limits to exposures are established and monitored by the Treasury Department and managed by the Investment Department. | |
• | The Investment Department is responsible for managing the exposure to foreign currency investments. Exposure limits to unhedged foreign currency investments are incorporated into the standing authorizations granted to management by the Board of Directors and are reported to the Board of Directors on a periodic basis. | |
• | The lines of business are responsible for establishing limits and managing any foreign exchange rate exposure caused by the sale or issuance of insurance products. |
• | Risks Related to Living Benefit Riders — The Company uses a wide range of derivative contracts to hedge the risk associated with variable annuity living benefit riders. These hedges include equity and interest rate futures, interest rate swaps, currency futures/forwards, equity indexed options and interest rate option contracts and equity variance swaps. | |
• | Minimum Interest Rate Guarantees — For certain Company liability contracts, the Company provides the contractholder a guaranteed minimum interest rate. These contracts include certain fixed annuities and other insurance liabilities. The Company purchases interest rate floors to reduce risk associated with these liability guarantees. | |
• | Reinvestment Risk in Long Duration Liability Contracts — Derivatives are used to hedge interest rate risk related to certain long duration liability contracts, such as long term care. Hedges include zero coupon interest rate swaps and swaptions. |
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• | Foreign Currency Risk — The Company uses currency swaps and forwards to hedge foreign currency risk. These hedges primarily swap foreign denominated bonds or equity exposures to US dollars. | |
• | General ALM Hedging Strategies — In the ordinary course of managing the Company’s asset/liability risks, the Company uses interest rate futures, interest rate swaps, interest rate caps, interest rate floors and inflation swaps. These hedges are designed to reduce interest rate risk or inflation risk related to the existing assets or liabilities or related to expected future cash flows. |
• | the net present values of its interest rate sensitive exposures resulting from a 10% change (increase or decrease) in interest rates; | |
• | the U.S. dollar equivalent estimated fair values of the Company’s foreign currency exposures due to a 10% change (increase or decrease) in foreign currency exchange rates; and | |
• | the estimated fair value of its equity positions due to a 10% change (increase or decrease) in equity market prices. |
• | the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgages; | |
• | the derivatives that qualify as hedges, the impact on reported earnings may be materially different from the change in market values; | |
• | the analysis excludes other significant real estate holdings and liabilities pursuant to insurance contracts; and | |
• | the model assumes that the composition of assets and liabilities remains unchanged throughout the year. |
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December 31, 2008 | ||||
(In millions) | ||||
Non-trading: | ||||
Interest rate risk | $ | 4,695 | ||
Foreign currency exchange rate risk | $ | 522 | ||
Equity price risk | $ | 176 | ||
Trading: | ||||
Interest rate risk | $ | 4 | ||
Foreign currency exchange rate risk | $ | 4 |
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December 31, 2008 | ||||||||||||
Assuming a | ||||||||||||
10% Increase | ||||||||||||
Notional | Estimated | in the Yield | ||||||||||
Amount | Fair Value(3) | Curve | ||||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Fixed maturity securities | $ | 188,251 | $ | (2,814 | ) | |||||||
Equity securities | 3,197 | — | ||||||||||
Trading securities | 946 | (4 | ) | |||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | 48,133 | (155 | ) | |||||||||
Held-for-sale | 2,010 | (6 | ) | |||||||||
Mortgage and consumer loans, net | 50,143 | (161 | ) | |||||||||
Policy loans | 11,952 | (146 | ) | |||||||||
Real estate joint ventures (1) | 176 | — | ||||||||||
Other limited partnership interests (1) | 2,269 | — | ||||||||||
Short-term investments | 13,878 | (3 | ) | |||||||||
Other invested assets: | ||||||||||||
Mortgage servicing rights | 191 | (2 | ) | |||||||||
Other | 900 | (7 | ) | |||||||||
Cash and cash equivalents | 24,207 | — | ||||||||||
Accrued investment income | 3,061 | — | ||||||||||
Premiums and other receivables | 3,473 | (216 | ) | |||||||||
Other assets | 629 | (49 | ) | |||||||||
Assets of subsidiaries held-for-sale | 649 | (6 | ) | |||||||||
Net embedded derivatives within asset host contracts (2) | 205 | (19 | ) | |||||||||
Mortgage loan commitments | $ | 2,690 | (129 | ) | (6 | ) | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | 979 | (105 | ) | — | ||||||||
Total assets | $ | (3,433 | ) | |||||||||
Liabilities | ||||||||||||
Policyholder account balances | $ | 102,902 | $ | 878 | ||||||||
Short-term debt | 2,659 | — | ||||||||||
Long-term debt | 8,155 | 143 | ||||||||||
Collateral financing arrangements | 1,880 | — | ||||||||||
Junior subordinated debt securities | 2,606 | 30 | ||||||||||
Payables for collateral under securities loaned and other transactions | 31,059 | — | ||||||||||
Other liabilities: | ||||||||||||
Trading liabilities | 57 | — | ||||||||||
Other | 638 | — | ||||||||||
Liabilities of subsidiaries held-for-sale | 49 | — | ||||||||||
Net embedded derivatives within liability host contracts (2) | 3,051 | 216 | ||||||||||
Total liabilities | $ | 1,267 | ||||||||||
Other | ||||||||||||
Derivative instruments (designated hedges or otherwise) | ||||||||||||
Interest rate swaps | $ | 34,060 | $ | 3,149 | $ | (550 | ) | |||||
Interest rate floors | 48,517 | 1,748 | (173 | ) | ||||||||
Interest rate caps | 24,643 | 11 | 4 | |||||||||
Financial futures | 19,908 | (160 | ) | (1,565 | ) | |||||||
Foreign currency swaps | 19,438 | 87 | (46 | ) | ||||||||
Foreign currency forwards | 5,167 | 24 | 1 | |||||||||
Options | 8,450 | 3,127 | (199 | ) | ||||||||
Financial forwards | 28,176 | 296 | (5 | ) | ||||||||
Credit default swaps | 5,219 | 83 | — | |||||||||
Synthetic GICs | 4,260 | — | — | |||||||||
Other | 250 | (101 | ) | — | ||||||||
Total other | $ | (2,533 | ) | |||||||||
Net change | $ | (4,699 | ) | |||||||||
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(1) | Represents only those investments accounted for using the cost method. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. | |
(3) | Separate account assets and liabilities which are interest rate sensitive are not included herein as any interest rate risk is borne by the holder of the separate account. |
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December 31, 2008 | ||||||||||||
Assuming a | ||||||||||||
10% Increase | ||||||||||||
Notional | Estimated | in the Foreign | ||||||||||
Amount | Fair Value(1) | Exchange Rate | ||||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Fixed maturity securities | $ | 188,251 | $ | (1,586 | ) | |||||||
Trading securities | 946 | (4 | ) | |||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | 48,133 | (311 | ) | |||||||||
Held-for-sale | 2,010 | (13 | ) | |||||||||
Mortgage and consumer loans, net | 50,143 | (324 | ) | |||||||||
Policy loans | 11,952 | (40 | ) | |||||||||
Short-term investments | 13,878 | (69 | ) | |||||||||
Cash and cash equivalents | 24,207 | (90 | ) | |||||||||
Total assets | $ | (2,113 | ) | |||||||||
Liabilities | ||||||||||||
Policyholder account balances | $ | 102,902 | $ | 1,426 | ||||||||
Long-term debt | 8,155 | 60 | ||||||||||
Total liabilities | $ | 1,486 | ||||||||||
Other | ||||||||||||
Derivative instruments (designated hedges or otherwise) | ||||||||||||
Interest rate swaps | $ | 34,060 | $ | 3,149 | $ | (18 | ) | |||||
Interest rate floors | 48,517 | 1,748 | — | |||||||||
Interest rate caps | 24,643 | 11 | — | |||||||||
Financial futures | 19,908 | (160 | ) | 2 | ||||||||
Foreign currency swaps | 19,438 | 87 | (26 | ) | ||||||||
Foreign currency forwards | 5,167 | 24 | 239 | |||||||||
Options | 8,450 | 3,127 | (90 | ) | ||||||||
Financial forwards | 28,176 | 296 | (6 | ) | ||||||||
Credit default swaps | 5,219 | 83 | — | |||||||||
Synthetic GICs | 4,260 | — | — | |||||||||
Other | 250 | (101 | ) | — | ||||||||
Total other | $ | 101 | ||||||||||
Net change | $ | (526 | ) | |||||||||
(1) | Estimated fair value presented in the table above represents the estimated fair value of all financial instruments within this financial statement caption not necessarily those solely subject to foreign exchange risk. |
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December 31, 2008 | ||||||||||||
Assuming a | ||||||||||||
10% Increase | ||||||||||||
Notional | Estimated | in Equity | ||||||||||
Amount | Fair Value(1) | Prices | ||||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Equity securities | $ | 3,197 | $ | 218 | ||||||||
Net embedded derivatives within asset host contracts (2) | 205 | (15 | ) | |||||||||
Total assets | $ | 203 | ||||||||||
Liabilities | ||||||||||||
Policyholder account balances | $ | 102,902 | $ | 121 | ||||||||
Net embedded derivatives within liability host contracts (2) | 3,051 | 240 | ||||||||||
Total liabilities | $ | 361 | ||||||||||
Other | ||||||||||||
Derivative instruments (designated hedges or otherwise) | ||||||||||||
Interest rate swaps | $ | 34,060 | $ | 3,149 | — | |||||||
Interest rate floors | 48,517 | 1,748 | — | |||||||||
Interest rate caps | 24,643 | 11 | — | |||||||||
Financial futures | 19,908 | (160 | ) | (626 | ) | |||||||
Foreign currency swaps | 19,438 | 87 | — | |||||||||
Foreign currency forwards | 5,167 | 24 | — | |||||||||
Options | 8,450 | 3,127 | (137 | ) | ||||||||
Financial forwards | 28,176 | 296 | 3 | |||||||||
Credit default swaps | 5,219 | 83 | — | |||||||||
Synthetic GICs | 4,260 | — | — | |||||||||
Other | 250 | (101 | ) | 20 | ||||||||
Total other | $ | (740 | ) | |||||||||
Net change | $ | (176 | ) | |||||||||
(1) | Estimated fair value presented in the table above represents the estimated fair value of all financial instruments within this financial statement caption not necessarily those solely subject to equity price risk. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. |
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Item 8. | Financial Statements and Supplementary Data |
Page | ||||
F-1 | ||||
Financial Statements at December 31, 2008 and 2007 and for the Years Ended December 31, 2008, 2007 and 2006: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
Financial Statement Schedules at December 31, 2008 and 2007 and for the Years Ended December 31, 2008, 2007 and 2006: | ||||
F-165 | ||||
F-166 | ||||
F-181 | ||||
F-183 |
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F-1
Table of Contents
Consolidated Balance Sheets
December 31, 2008 and 2007
(In millions, except share and per share data)
2008 | 2007 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $209,508 and $229,354, respectively) | $ | 188,251 | $ | 232,336 | ||||
Equity securities available-for-sale, at estimated fair value (cost: $4,131 and $5,732, respectively) | 3,197 | 5,911 | ||||||
Trading securities, at estimated fair value (cost: $1,107 and $768, respectively) | 946 | 779 | ||||||
Mortgage and consumer loans: | ||||||||
Held-for-investment, at amortized cost (net of allowances for loan losses of $304 and $197, respectively) | 49,352 | 46,149 | ||||||
Held-for-sale, principally at estimated fair value | 2,012 | 5 | ||||||
Mortgage and consumer loans, net | 51,364 | 46,154 | ||||||
Policy loans | 9,802 | 9,326 | ||||||
Real estate and real estate joint ventures held-for-investment | 7,585 | 6,728 | ||||||
Real estate held-for-sale | 1 | 39 | ||||||
Other limited partnership interests | 6,039 | 6,155 | ||||||
Short-term investments | 13,878 | 2,544 | ||||||
Other invested assets | 17,248 | 8,076 | ||||||
Total investments | 298,311 | 318,048 | ||||||
Cash and cash equivalents | 24,207 | 9,961 | ||||||
Accrued investment income | 3,061 | 3,545 | ||||||
Premiums and other receivables | 16,973 | 13,373 | ||||||
Deferred policy acquisition costs and value of business acquired | 20,144 | 17,810 | ||||||
Current income tax recoverable | — | 334 | ||||||
Deferred income tax assets | 4,927 | — | ||||||
Goodwill | 5,008 | 4,814 | ||||||
Other assets | 7,262 | 8,239 | ||||||
Assets of subsidiaries held-for-sale | 946 | 22,883 | ||||||
Separate account assets | 120,839 | 160,142 | ||||||
Total assets | $ | 501,678 | $ | 559,149 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 130,555 | $ | 126,016 | ||||
Policyholder account balances | 149,805 | 130,342 | ||||||
Other policyholder funds | 7,762 | 7,838 | ||||||
Policyholder dividends payable | 1,023 | 991 | ||||||
Policyholder dividend obligation | — | 789 | ||||||
Short-term debt | 2,659 | 667 | ||||||
Long-term debt | 9,667 | 9,100 | ||||||
Collateral financing arrangements | 5,192 | 4,882 | ||||||
Junior subordinated debt securities | 3,758 | 4,075 | ||||||
Current income tax payable | 342 | — | ||||||
Deferred income tax liability | — | 1,502 | ||||||
Payables for collateral under securities loaned and other transactions | 31,059 | 44,136 | ||||||
Other liabilities | 14,535 | 12,829 | ||||||
Liabilities of subsidiaries held-for-sale | 748 | 20,661 | ||||||
Separate account liabilities | 120,839 | 160,142 | ||||||
Total liabilities | 477,944 | 523,970 | ||||||
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; 798,016,664 and 786,766,664 shares issued at December 31, 2008 and 2007, respectively; 793,629,070 and 729,223,440 shares outstanding at December 31, 2008 and 2007, respectively | 8 | 8 | ||||||
Additional paid-in capital | 15,811 | 17,098 | ||||||
Retained earnings | 22,403 | 19,884 | ||||||
Treasury stock, at cost; 4,387,594 and 57,543,224 shares at December 31, 2008 and 2007, respectively | (236 | ) | (2,890 | ) | ||||
Accumulated other comprehensive income (loss) | (14,253 | ) | 1,078 | |||||
Total stockholders’ equity | 23,734 | 35,179 | ||||||
Total liabilities and stockholders’ equity | $ | 501,678 | $ | 559,149 | ||||
F-2
Table of Contents
Consolidated Statements of Income
For the Years Ended December 31, 2008, 2007 and 2006
(In millions, except per share data)
2008 | 2007 | 2006 | ||||||||||
Revenues | ||||||||||||
Premiums | $ | 25,914 | $ | 22,970 | $ | 22,052 | ||||||
Universal life and investment-type product policy fees | 5,381 | 5,238 | 4,711 | |||||||||
Net investment income | 16,296 | 18,063 | 16,247 | |||||||||
Other revenues | 1,586 | 1,465 | 1,301 | |||||||||
Net investment gains (losses) | 1,812 | (578 | ) | (1,382 | ) | |||||||
Total revenues | 50,989 | 47,158 | 42,929 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 27,437 | 23,783 | 22,869 | |||||||||
Interest credited to policyholder account balances | 4,787 | 5,461 | 4,899 | |||||||||
Policyholder dividends | 1,751 | 1,723 | 1,698 | |||||||||
Other expenses | 11,924 | 10,429 | 9,537 | |||||||||
Total expenses | 45,899 | 41,396 | 39,003 | |||||||||
Income from continuing operations before provision for income tax | 5,090 | 5,762 | 3,926 | |||||||||
Provision for income tax | 1,580 | 1,660 | 1,016 | |||||||||
Income from continuing operations | 3,510 | 4,102 | 2,910 | |||||||||
Income (loss) from discontinued operations, net of income tax | (301 | ) | 215 | 3,383 | ||||||||
Net income | 3,209 | 4,317 | 6,293 | |||||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | ||||||
Income from continuing operations available to common shareholders per common share | ||||||||||||
Basic | $ | 4.60 | $ | 5.33 | $ | 3.65 | ||||||
Diluted | $ | 4.54 | $ | 5.20 | $ | 3.60 | ||||||
Net income available to common shareholders per common share | ||||||||||||
Basic | $ | 4.19 | $ | 5.62 | $ | 8.09 | ||||||
Diluted | $ | 4.14 | $ | 5.48 | $ | 7.99 | ||||||
Cash dividends per common share | $ | 0.74 | $ | 0.74 | $ | 0.59 | ||||||
F-3
Table of Contents
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2008, 2007 and 2006
(In millions)
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||
Net | Foreign | Defined | ||||||||||||||||||||||||||||||||||
Additional | Treasury | Unrealized | Currency | Benefit | ||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Investment | Translation | Plans | |||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | Gains (Losses) | Adjustments | Adjustment | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2006 | $ | 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 | |||||||||||||||||||||||||
Cumulative effect of changes in accounting principles, net of income tax (Note 1) | 27 | (10 | ) | 17 | ||||||||||||||||||||||||||||||||
Balance at January 1, 2008 | 1 | 8 | 17,098 | 19,911 | (2,890 | ) | 961 | 347 | (240 | ) | 35,196 | |||||||||||||||||||||||||
Common stock issuance — newly issued shares | 290 | 290 | ||||||||||||||||||||||||||||||||||
Treasury stock transactions: | ||||||||||||||||||||||||||||||||||||
Acquired in connection with share repurchase agreements (Note 18) | 450 | (1,250 | ) | (800 | ) | |||||||||||||||||||||||||||||||
Issued in connection with common stock issuance | (2,104 | ) | 4,040 | 1,936 | ||||||||||||||||||||||||||||||||
Issued to settle stock forward contracts | (29 | ) | 1,064 | 1,035 | ||||||||||||||||||||||||||||||||
Acquired in connection with split-off of subsidiary | (1,318 | ) | (1,318 | ) | ||||||||||||||||||||||||||||||||
Other, net | (35 | ) | 118 | 83 | ||||||||||||||||||||||||||||||||
Deferral of stock-based compensation | 141 | 141 | ||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (125 | ) | (125 | ) | ||||||||||||||||||||||||||||||||
Dividends on common stock | (592 | ) | (592 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 3,209 | 3,209 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | 241 | 241 | ||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (13,766 | ) | (13,766 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (593 | ) | (593 | ) | ||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax | (1,203 | ) | (1,203 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (15,321 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (12,112 | ) | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | $ | 1 | $ | 8 | $ | 15,811 | $ | 22,403 | $ | (236 | ) | $ | (12,564 | ) | $ | (246 | ) | $ | (1,443 | ) | $ | 23,734 | ||||||||||||||
F-4
Table of Contents
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2008, 2007 and 2006
(In millions)
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 3,209 | $ | 4,317 | $ | 6,293 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization expenses | 375 | 457 | 394 | |||||||||
Amortization of premiums and accretion of discounts associated with investments, net | (939 | ) | (955 | ) | (618 | ) | ||||||
(Gains) losses from sales of investments and businesses, net | (1,127 | ) | 619 | (3,492 | ) | |||||||
Undistributed equity earnings of real estate joint ventures and other limited partnership interests | 679 | (606 | ) | (459 | ) | |||||||
Interest credited to policyholder account balances | 4,912 | 5,790 | 5,246 | |||||||||
Interest credited to bank deposits | 166 | 200 | 193 | |||||||||
Universal life and investment-type product policy fees | (5,462 | ) | (5,310 | ) | (4,779 | ) | ||||||
Change in accrued investment income | 428 | (275 | ) | (315 | ) | |||||||
Change in premiums and other receivables | (1,929 | ) | (283 | ) | (2,655 | ) | ||||||
Change in deferred policy acquisition costs, net | 545 | (1,178 | ) | (1,317 | ) | |||||||
Change in insurance-related liabilities | 5,307 | 5,463 | 5,031 | |||||||||
Change in trading securities | (418 | ) | 200 | (432 | ) | |||||||
Change in residential mortgage loans held-for-sale, net | (1,946 | ) | — | — | ||||||||
Change in mortgage servicing rights | (185 | ) | — | — | ||||||||
Change in income tax payable | 920 | 101 | 2,039 | |||||||||
Change in other assets | 5,737 | 582 | 1,665 | |||||||||
Change in other liabilities | 232 | 729 | (202 | ) | ||||||||
Other, net | 199 | 51 | (38 | ) | ||||||||
Net cash provided by operating activities | 10,703 | 9,902 | 6,554 | |||||||||
Cash flows from investing activities | ||||||||||||
Sales, maturities and repayments of: | ||||||||||||
Fixed maturity securities | 102,250 | 112,062 | 113,321 | |||||||||
Equity securities | 2,707 | 1,738 | 1,313 | |||||||||
Mortgage and consumer loans | 6,077 | 9,854 | 8,348 | |||||||||
Real estate and real estate joint ventures | 140 | 664 | 6,211 | |||||||||
Other limited partnership interests | 593 | 1,121 | 1,768 | |||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | (86,874 | ) | (112,534 | ) | (129,644 | ) | ||||||
Equity securities | (1,494 | ) | (2,883 | ) | (1,052 | ) | ||||||
Mortgage and consumer loans | (10,096 | ) | (14,365 | ) | (13,472 | ) | ||||||
Real estate and real estate joint ventures | (1,170 | ) | (2,228 | ) | (1,523 | ) | ||||||
Other limited partnership interests | (1,643 | ) | (2,041 | ) | (1,915 | ) | ||||||
Net change in short-term investments | (11,269 | ) | 55 | 595 | ||||||||
Additional consideration related to purchases of businesses | — | — | (115 | ) | ||||||||
Purchases of businesses, net of cash received of $314, $13 and $0, respectively | (469 | ) | (43 | ) | — | |||||||
(Payments) proceeds from sales of businesses, net of cash disposed of $0, $763 and $0, respectively | (4 | ) | (694 | ) | 48 | |||||||
Disposal of subsidiary | (313 | ) | — | — | ||||||||
Net change in other invested assets | (492 | ) | (1,020 | ) | (2,411 | ) | ||||||
Net change in policy loans | (467 | ) | (190 | ) | (247 | ) | ||||||
Other, net | (147 | ) | (140 | ) | (111 | ) | ||||||
Net cash used in investing activities | $ | (2,671 | ) | $ | (10,644 | ) | $ | (18,886 | ) | |||
F-5
Table of Contents
Consolidated Statements of Cash Flows — (Continued)
For the Years Ended December 31, 2008, 2007 and 2006
(In millions)
2008 | 2007 | 2006 | ||||||||||
Cash flows from financing activities | ||||||||||||
Policyholder account balances: | ||||||||||||
Deposits | $ | 76,963 | $ | 58,025 | $ | 53,946 | ||||||
Withdrawals | (61,134 | ) | (55,256 | ) | (50,574 | ) | ||||||
Net change in short-term debt | 1,992 | (782 | ) | 35 | ||||||||
Long-term debt issued | 339 | 726 | 284 | |||||||||
Long-term debt repaid | (422 | ) | (286 | ) | (732 | ) | ||||||
Collateral financing arrangements issued | 310 | 4,882 | 850 | |||||||||
Cash paid in connection with collateral financing arrangements | (800 | ) | — | — | ||||||||
Junior subordinated debt securities issued | 750 | 694 | 1,248 | |||||||||
Shares subject to mandatory redemption | — | (131 | ) | — | ||||||||
Debt issuance costs | (34 | ) | (14 | ) | (25 | ) | ||||||
Net change in payables for collateral under securities loaned and other transactions | (13,077 | ) | (1,710 | ) | 11,331 | |||||||
Common stock issued, net of issuance costs | 290 | — | — | |||||||||
Stock options exercised | 45 | 110 | 83 | |||||||||
Treasury stock acquired in connection with share repurchase agreements | (1,250 | ) | (1,705 | ) | (500 | ) | ||||||
Treasury stock issued in connection with common stock issuance, net of issuance costs | 1,936 | — | — | |||||||||
Treasury stock issued to settle stock forward contracts | 1,035 | — | — | |||||||||
Dividends on preferred stock | (125 | ) | (137 | ) | (134 | ) | ||||||
Dividends on common stock | (592 | ) | (541 | ) | (450 | ) | ||||||
Other, net | (38 | ) | 67 | 12 | ||||||||
Net cash provided by financing activities | 6,188 | 3,942 | 15,374 | |||||||||
Effect of change in foreign currency exchange rates on cash balances | (349 | ) | 61 | 47 | ||||||||
Change in cash and cash equivalents | 13,871 | 3,261 | 3,089 | |||||||||
Cash and cash equivalents, beginning of year | 10,368 | 7,107 | 4,018 | |||||||||
Cash and cash equivalents, end of year | $ | 24,239 | $ | 10,368 | $ | 7,107 | ||||||
Cash and cash equivalents, subsidiaries held-for-sale, beginning of year | $ | 407 | $ | 170 | $ | 133 | ||||||
Cash and cash equivalents, subsidiaries held-for-sale, end of year | $ | 32 | $ | 407 | $ | 170 | ||||||
Cash and cash equivalents, from continuing operations, beginning of year | $ | 9,961 | $ | 6,937 | $ | 3,885 | ||||||
Cash and cash equivalents, from continuing operations, end of year | $ | 24,207 | $ | 9,961 | $ | 6,937 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid during the year for: | ||||||||||||
Interest | $ | 1,107 | $ | 1,011 | $ | 819 | ||||||
Income tax | $ | 27 | $ | 2,128 | $ | 409 | ||||||
Non-cash transactions during the year: | ||||||||||||
Business acquisitions: | ||||||||||||
Assets acquired | $ | 2,083 | $ | — | $ | — | ||||||
Less: cash paid | (783 | ) | — | — | ||||||||
Liabilities assumed | $ | 1,300 | $ | — | $ | — | ||||||
Disposal of subsidiary: | ||||||||||||
Assets disposed | $ | 22,135 | $ | — | $ | — | ||||||
Less: liabilities disposed | (20,689 | ) | — | — | ||||||||
Net assets disposed | 1,446 | — | — | |||||||||
Add: cash disposed | 270 | — | — | |||||||||
Add: transaction costs, including cash paid of $43 | 60 | — | — | |||||||||
Less: treasury stock received in common stock exchange | (1,318 | ) | — | — | ||||||||
Loss on disposal of subsidiary | $ | 458 | $ | — | $ | — | ||||||
Remarketing of debt securities: | ||||||||||||
Fixed maturity securities redeemed | $ | 32 | $ | — | $ | — | ||||||
Long-term debt issued | $ | 1,035 | $ | — | $ | — | ||||||
Junior subordinated debt securities redeemed | $ | 1,067 | $ | — | $ | — | ||||||
Contribution of equity securities to MetLife Foundation | $ | — | $ | 12 | $ | — | ||||||
Fixed maturity securities received in connection with insurance contract commutation | $ | 115 | $ | — | $ | — | ||||||
Real estate acquired in satisfaction of debt | $ | 1 | $ | 1 | $ | 6 | ||||||
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1. | Business, Basis of Presentation, and Summary of Significant Accounting Policies |
(i) | the estimated fair value of investments in the absence of quoted market values; |
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(ii) | investment impairments; | |
(iii) | the recognition of income on certain investment entities; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(vi) | the estimated fair value of and accounting for derivatives; | |
(vii) | the capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”); | |
(viii) | the measurement of goodwill and related impairment, if any; | |
(ix) | the liability for future policyholder benefits; | |
(x) | accounting for income taxes and the valuation of deferred tax assets; | |
(xi) | accounting for reinsurance transactions; | |
(xii) | accounting for employee benefit plans; and | |
(xiii) | the liability for litigation and regulatory matters. |
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Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. |
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• | 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 (“S&P”) 500 Index. The benefit assumptions 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. Certain GMIBs have settlement features that result in a portion of that guarantee being accounted for as an embedded derivative and are recorded in policyholder account balances as described below. |
• | 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 estimated 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 an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. |
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(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
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Litigation Contingencies |
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Separate Accounts |
Fair Value |
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Investments |
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Derivative Financial Instruments |
(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 |
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(iv) | amends SFAS 140 to eliminate the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. |
Income Taxes |
Insurance Contracts |
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Defined Benefit and Other Postretirement Plans |
(i) | recognition in the statement of financial position of the funded status of defined benefit plans measured as the difference between the estimated 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 benefit 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. |
Stock Compensation Plans |
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Other Pronouncements |
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Business Combinations |
• | All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. | |
• | Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
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Derivative Financial Instruments |
Other Pronouncements |
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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. |
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3. | Investments |
December 31, 2008 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 72,211 | $ | 994 | $ | 9,902 | $ | 63,303 | 33.6 | % | ||||||||||
Residential mortgage-backed securities | 39,995 | 753 | 4,720 | 36,028 | 19.2 | |||||||||||||||
Foreign corporate securities | 34,798 | 565 | 5,684 | 29,679 | 15.8 | |||||||||||||||
U.S. Treasury/agency securities | 17,229 | 4,082 | 1 | 21,310 | 11.3 | |||||||||||||||
Commercial mortgage-backed securities | 16,079 | 18 | 3,453 | 12,644 | 6.7 | |||||||||||||||
Asset-backed securities | 14,246 | 16 | 3,739 | 10,523 | 5.6 | |||||||||||||||
Foreign government securities | 9,474 | 1,056 | 377 | 10,153 | 5.4 | |||||||||||||||
State and political subdivision securities | 5,419 | 80 | 942 | 4,557 | 2.4 | |||||||||||||||
Other fixed maturity securities | 57 | — | 3 | 54 | — | |||||||||||||||
Total fixed maturity securities (1), (2) | $ | 209,508 | $ | 7,564 | $ | 28,821 | $ | 188,251 | 100.0 | % | ||||||||||
Common stock | $ | 1,778 | $ | 40 | $ | 133 | $ | 1,685 | 52.7 | % | ||||||||||
Non-redeemable preferred stock (1) | 2,353 | 4 | 845 | 1,512 | 47.3 | |||||||||||||||
Total equity securities | $ | 4,131 | $ | 44 | $ | 978 | $ | 3,197 | 100.0 | % | ||||||||||
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December 31, 2007 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 74,310 | $ | 1,685 | $ | 2,076 | $ | 73,919 | 31.8 | % | ||||||||||
Residential mortgage-backed securities | 54,773 | 598 | 376 | 54,995 | 23.7 | |||||||||||||||
Foreign corporate securities | 36,232 | 1,701 | 767 | 37,166 | 16.0 | |||||||||||||||
U.S. Treasury/agency securities | 19,723 | 1,482 | 13 | 21,192 | 9.1 | |||||||||||||||
Commercial mortgage-backed securities | 16,946 | 241 | 194 | 16,993 | 7.3 | |||||||||||||||
Asset-backed securities | 11,048 | 40 | 516 | 10,572 | 4.6 | |||||||||||||||
Foreign government securities | 11,645 | 1,350 | 182 | 12,813 | 5.5 | |||||||||||||||
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 (1),(2) | $ | 229,354 | $ | 7,250 | $ | 4,268 | $ | 232,336 | 100.0 | % | ||||||||||
Common stock | $ | 2,477 | $ | 568 | $ | 108 | $ | 2,937 | 49.7 | % | ||||||||||
Non-redeemable preferred stock (1) | 3,255 | 60 | 341 | 2,974 | 50.3 | |||||||||||||||
Total equity securities | $ | 5,732 | $ | 628 | $ | 449 | $ | 5,911 | 100.0 | % | ||||||||||
(1) | The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest ratestep-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest ratestep-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued bynon-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as “perpetual hybrid securities.” Perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at December 31, 2008 and 2007 had an estimated fair value of $1,224 million and $2,051 million, respectively. In addition, the Company held $288 million and $923 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at December 31, 2008 and 2007 had an estimated fair value of $2,110 million and $3,896 million, respectively. In addition, the Company held $46 million and $57 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, included in fixed maturity securities. | |
(2) | At December 31, 2008 and 2007 the Company also held $2,052 million and $3,432 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates which are included within fixed maturity securities. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as “capital securities” within U.S. corporate securities. |
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Foreign (1) | $ | 29,679 | 32.0 | % | $ | 37,166 | 33.4 | % | ||||||||
Finance | 14,996 | 16.1 | 20,639 | 18.6 | ||||||||||||
Industrial | 13,324 | 14.3 | 15,838 | 14.3 | ||||||||||||
Consumer | 13,122 | 14.1 | 15,793 | 14.2 | ||||||||||||
Utility | 12,434 | 13.4 | 13,206 | 11.9 | ||||||||||||
Communications | 5,714 | 6.1 | 7,679 | 6.9 | ||||||||||||
Other | 3,713 | 4.0 | 764 | 0.7 | ||||||||||||
Total | $ | 92,982 | 100.0 | % | $ | 111,085 | 100.0 | % | ||||||||
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(1) | Includes U.S. dollar-denominated debt obligations of foreign obligors, and other fixed maturity foreign investments. |
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Collateralized mortgage obligations | $ | 26,025 | 72.2 | % | $ | 36,303 | 66.0 | % | ||||||||
Pass-through securities | 10,003 | 27.8 | 18,692 | 34.0 | ||||||||||||
Total residential mortgage-backed securities | $ | 36,028 | 100.0 | % | $ | 54,995 | 100.0 | % | ||||||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 5,556 | $ | 5,491 | $ | 4,362 | $ | 4,453 | ||||||||
Due after one year through five years | 33,604 | 30,884 | 41,297 | 42,013 | ||||||||||||
Due after five years through ten years | 41,481 | 36,895 | 38,969 | 39,227 | ||||||||||||
Due after ten years | 58,547 | 55,786 | 61,959 | 64,083 | ||||||||||||
Subtotal | 139,188 | 129,056 | 146,587 | 149,776 | ||||||||||||
Mortgage-backed and asset-backed securities | 70,320 | 59,195 | 82,767 | 82,560 | ||||||||||||
Total fixed maturity securities | $ | 209,508 | $ | 188,251 | $ | 229,354 | $ | 232,336 | ||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | (21,246 | ) | $ | 3,479 | $ | 5,075 | |||||
Equity securities | (934 | ) | 159 | 541 | ||||||||
Derivatives | (2 | ) | (373 | ) | (208 | ) | ||||||
Minority interest | (10 | ) | (150 | ) | (159 | ) | ||||||
Other | 53 | 3 | 9 | |||||||||
Subtotal | (22,139 | ) | 3,118 | 5,258 | ||||||||
Amounts allocated from: | ||||||||||||
Insurance liability loss recognition | 42 | (608 | ) | (1,149 | ) | |||||||
DAC and VOBA | 3,025 | (327 | ) | (189 | ) | |||||||
Policyholder dividend obligation | — | (789 | ) | (1,062 | ) | |||||||
Subtotal | 3,067 | (1,724 | ) | (2,400 | ) | |||||||
Deferred income tax | 6,508 | (423 | ) | (994 | ) | |||||||
Subtotal | 9,575 | (2,147 | ) | (3,394 | ) | |||||||
Net unrealized investment gains (losses) | $ | (12,564 | ) | $ | 971 | $ | 1,864 | |||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance, end of prior period | $ | 971 | $ | 1,864 | $ | 1,942 | ||||||
Cumulative effect of change in accounting principles, net of income tax | (10 | ) | — | — | ||||||||
Balance, beginning of period | 961 | 1,864 | 1,942 | |||||||||
Unrealized investment gains (losses) during the year | (25,377 | ) | (2,140 | ) | (706 | ) | ||||||
Unrealized investment losses of subsidiaries at the date of disposal | 130 | — | — | |||||||||
Unrealized investment gains (losses) relating to: | ||||||||||||
Insurance liability gain (loss) recognition | 650 | 541 | 261 | |||||||||
DAC and VOBA | 3,370 | (138 | ) | (110 | ) | |||||||
DAC and VOBA of subsidiaries at date of disposal | (18 | ) | — | — | ||||||||
Policyholder dividend obligation | 789 | 273 | 430 | |||||||||
Deferred income tax | 6,991 | 571 | 47 | |||||||||
Deferred income tax of subsidiaries at date of disposal | (60 | ) | — | — | ||||||||
Balance, end of period | $ | (12,564 | ) | $ | 971 | $ | 1,864 | |||||
Change in net unrealized investment gains (losses) | $ | (13,525 | ) | $ | (893 | ) | $ | (78 | ) | |||
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December 31, 2008 | ||||||||||||||||||||||||
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 | $ | 30,076 | $ | 4,479 | $ | 18,011 | $ | 5,423 | $ | 48,087 | $ | 9,902 | ||||||||||||
Residential mortgage-backed securities | 10,032 | 2,711 | 4,572 | 2,009 | 14,604 | 4,720 | ||||||||||||||||||
Foreign corporate securities | 15,634 | 3,157 | 6,609 | 2,527 | 22,243 | 5,684 | ||||||||||||||||||
U.S. Treasury/agency securities | 106 | 1 | — | — | 106 | 1 | ||||||||||||||||||
Commercial mortgage-backed securities | 9,259 | 1,665 | 3,093 | 1,788 | 12,352 | 3,453 | ||||||||||||||||||
Asset-backed securities | 6,412 | 1,325 | 3,777 | 2,414 | 10,189 | 3,739 | ||||||||||||||||||
Foreign government securities | 2,030 | 316 | 403 | 61 | 2,433 | 377 | ||||||||||||||||||
State and political subdivision securities | 2,035 | 405 | 948 | 537 | 2,983 | 942 | ||||||||||||||||||
Other fixed maturity securities | 20 | 3 | 2 | — | 22 | 3 | ||||||||||||||||||
Total fixed maturity securities | $ | 75,604 | $ | 14,062 | $ | 37,415 | $ | 14,759 | $ | 113,019 | $ | 28,821 | ||||||||||||
Equity securities | $ | 727 | $ | 306 | $ | 978 | $ | 672 | $ | 1,705 | $ | 978 | ||||||||||||
Total number of securities in an unrealized loss position | 9,066 | 3,539 | ||||||||||||||||||||||
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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 | $ | 27,895 | $ | 1,358 | $ | 11,601 | $ | 718 | $ | 39,496 | $ | 2,076 | ||||||||||||
Residential mortgage-backed securities | 14,077 | 272 | 5,841 | 104 | 19,918 | 376 | ||||||||||||||||||
Foreign corporate securities | 10,860 | 464 | 6,155 | 303 | 17,015 | 767 | ||||||||||||||||||
U.S. Treasury/agency securities | 431 | 3 | 622 | 10 | 1,053 | 13 | ||||||||||||||||||
Commercial mortgage-backed securities | 2,406 | 98 | 3,728 | 96 | 6,134 | 194 | ||||||||||||||||||
Asset-backed securities | 7,279 | 416 | 1,198 | 100 | 8,477 | 516 | ||||||||||||||||||
Foreign government securities | 3,387 | 158 | 436 | 24 | 3,823 | 182 | ||||||||||||||||||
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 | $ | 67,733 | $ | 2,879 | $ | 30,043 | $ | 1,389 | $ | 97,776 | $ | 4,268 | ||||||||||||
Equity securities | $ | 2,678 | $ | 378 | $ | 531 | $ | 71 | $ | 3,209 | $ | 449 | ||||||||||||
Total number of securities in an unrealized loss position | 7,476 | 2,650 | ||||||||||||||||||||||
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December 31, 2008 | ||||||||||||||||||||||||
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) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 32,658 | $ | 48,114 | $ | 2,358 | $ | 17,191 | 4,566 | 2,827 | ||||||||||||||
Six months or greater but less than nine months | 14,975 | 2,180 | 1,313 | 1,109 | 1,314 | 157 | ||||||||||||||||||
Nine months or greater but less than twelve months | 16,372 | 3,700 | 1,830 | 2,072 | 934 | 260 | ||||||||||||||||||
Twelve months or greater | 23,191 | 650 | 2,533 | 415 | 1,809 | 102 | ||||||||||||||||||
Total | $ | 87,196 | $ | 54,644 | $ | 8,034 | $ | 20,787 | ||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 386 | $ | 1,190 | $ | 58 | $ | 519 | 351 | 551 | ||||||||||||||
Six months or greater but less than nine months | 33 | 413 | 6 | 190 | 8 | 32 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3 | 487 | — | 194 | 5 | 15 | ||||||||||||||||||
Twelve months or greater | 171 | — | 11 | — | 20 | — | ||||||||||||||||||
Total | $ | 593 | $ | 2,090 | $ | 75 | $ | 903 | ||||||||||||||||
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December 31, 2007 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 46,343 | $ | 1,375 | $ | 1,482 | $ | 383 | 4,713 | 148 | ||||||||||||||
Six months or greater but less than nine months | 15,833 | 14 | 730 | 4 | 1,028 | 24 | ||||||||||||||||||
Nine months or greater but less than twelve months | 8,529 | 7 | 492 | 2 | 586 | — | ||||||||||||||||||
Twelve months or greater | 29,893 | 50 | 1,162 | 13 | 2,692 | 32 | ||||||||||||||||||
Total | $ | 100,598 | $ | 1,446 | $ | 3,866 | $ | 402 | ||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 1,757 | $ | 423 | $ | 148 | $ | 133 | 1,212 | 417 | ||||||||||||||
Six months or greater but less than nine months | 528 | — | 62 | — | 154 | — | ||||||||||||||||||
Nine months or greater but less than twelve months | 439 | — | 54 | — | 62 | 1 | ||||||||||||||||||
Twelve months or greater | 511 | — | 52 | — | 90 | — | ||||||||||||||||||
Total | $ | 3,235 | $ | 423 | $ | 316 | $ | 133 | ||||||||||||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
Sector: | ||||||||
U.S. corporate securities | 33 | % | 44 | % | ||||
Foreign corporate securities | 19 | 16 | ||||||
Residential mortgage-backed securities | 16 | 8 | ||||||
Asset-backed securities | 13 | 11 | ||||||
Commercial mortgage-backed securities | 11 | 4 | ||||||
State and political subdivision securities | 3 | 2 | ||||||
Foreign government securities | 1 | 4 | ||||||
Other | 4 | 11 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 27 | % | 12 | % | ||||
Finance | 24 | 33 | ||||||
Asset-backed | 13 | 11 | ||||||
Consumer | 11 | 3 | ||||||
Utility | 8 | 8 | ||||||
Communication | 5 | 2 | ||||||
Industrial | 4 | 19 | ||||||
Foreign government | 1 | 4 | ||||||
Other | 7 | 8 | ||||||
Total | 100 | % | 100 | % | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | (1,949 | ) | $ | (615 | ) | $ | (1,119 | ) | |||
Equity securities | (257 | ) | 164 | 84 | ||||||||
Mortgage and consumer loans | (136 | ) | 3 | (8 | ) | |||||||
Real estate and real estate joint ventures | (18 | ) | 46 | 102 | ||||||||
Other limited partnership interests | (140 | ) | 16 | 1 | ||||||||
Freestanding derivatives | 6,560 | 61 | (410 | ) | ||||||||
Embedded derivatives | (2,650 | ) | (321 | ) | 202 | |||||||
Other | 402 | 68 | (234 | ) | ||||||||
Net investment gains (losses) | $ | 1,812 | $ | (578 | ) | $ | (1,382 | ) | ||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Proceeds | $ | 62,495 | $ | 78,001 | $ | 86,725 | $ | 2,107 | $ | 1,112 | $ | 845 | $ | 64,602 | $ | 79,113 | $ | 87,570 | ||||||||||||||||||
Gross investment gains | 858 | 554 | 421 | 436 | 226 | 130 | 1,294 | 780 | 551 | |||||||||||||||||||||||||||
Gross investment losses | (1,511 | ) | (1,091 | ) | (1,484 | ) | (263 | ) | (43 | ) | (22 | ) | (1,774 | ) | (1,134 | ) | (1,506 | ) | ||||||||||||||||||
Writedowns | ||||||||||||||||||||||||||||||||||||
Credit-related | (1,138 | ) | (58 | ) | (56 | ) | (90 | ) | (19 | ) | (24 | ) | (1,228 | ) | (77 | ) | (80 | ) | ||||||||||||||||||
Other than credit-related (1) | (158 | ) | (20 | ) | — | (340 | ) | — | — | (498 | ) | (20 | ) | — | ||||||||||||||||||||||
Total writedowns | (1,296 | ) | (78 | ) | (56 | ) | (430 | ) | (19 | ) | (24 | ) | (1,726 | ) | (97 | ) | (80 | ) | ||||||||||||||||||
Net investment gains (losses) | $ | (1,949 | ) | $ | (615 | ) | $ | (1,119 | ) | $ | (257 | ) | $ | 164 | $ | 84 | $ | (2,206 | ) | $ | (451 | ) | $ | (1,035 | ) | |||||||||||
(1) | Other-than credit-related writedowns include items such as equity securities where the primary reason for the writedown was the severity and/or the duration of an unrealized loss position and fixed maturity securities where an interest-rate related writedown was taken. |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 13,577 | $ | 14,576 | $ | 13,523 | ||||||
Equity securities | 258 | 265 | 106 | |||||||||
Trading securities | (193 | ) | 50 | 71 | ||||||||
Mortgage and consumer loans | 2,855 | 2,811 | 2,488 | |||||||||
Policy loans | 601 | 572 | 547 | |||||||||
Real estate and real estate joint ventures | 581 | 950 | 777 | |||||||||
Other limited partnership interests | (170 | ) | 1,309 | 945 | ||||||||
Cash, cash equivalents and short-term investments | 353 | 491 | 513 | |||||||||
International joint ventures (1) | 43 | 17 | (9 | ) | ||||||||
Other | 349 | 320 | 269 | |||||||||
Total investment income | 18,254 | 21,361 | 19,230 | |||||||||
Less: Investment expenses | 1,958 | 3,298 | 2,983 | |||||||||
Net investment income | $ | 16,296 | $ | 18,063 | $ | 16,247 | ||||||
(1) | Net of changes in estimated fair value of derivatives related to economic hedges of these equity method investments that do not qualify for hedge accounting of $178 million, $12 million and ($40) million for the years ended December 31, 2008, 2007 and 2006, respectively. |
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 36,197 | 72.9 | % | $ | 34,824 | 75.1 | % | ||||||||
Agricultural mortgage loans | 12,295 | 24.8 | 10,476 | 22.6 | ||||||||||||
Consumer loans | 1,164 | 2.3 | 1,046 | 2.3 | ||||||||||||
Total | 49,656 | 100.0 | % | 46,346 | 100.0 | % | ||||||||||
Less: Valuation allowances | 304 | 197 | ||||||||||||||
Total mortgage and consumer loans held-for-investment | 49,352 | 46,149 | ||||||||||||||
Mortgage loans held-for-sale | 2,012 | 5 | ||||||||||||||
Mortgage and consumer loans, net | $ | 51,364 | $ | 46,154 | ||||||||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Region | ||||||||||||||||
Pacific | $ | 8,837 | 24.6 | % | $ | 8,436 | 24.4 | % | ||||||||
South Atlantic | 8,101 | 22.5 | 7,770 | 22.4 | ||||||||||||
Middle Atlantic | 5,931 | 16.5 | 5,042 | 14.5 | ||||||||||||
International | 3,414 | 9.5 | 3,642 | 10.5 | ||||||||||||
West South Central | 3,070 | 8.5 | 2,888 | 8.3 | ||||||||||||
East North Central | 2,591 | 7.2 | 2,866 | 8.3 | ||||||||||||
New England | 1,529 | 4.3 | 1,464 | 4.2 | ||||||||||||
Mountain | 1,052 | 2.9 | 1,002 | 2.9 | ||||||||||||
West North Central | 716 | 2.0 | 974 | 2.8 | ||||||||||||
East South Central | 468 | 1.3 | 481 | 1.4 | ||||||||||||
Other | 256 | 0.7 | 92 | 0.3 | ||||||||||||
Total | $ | 35,965 | 100.0 | % | $ | 34,657 | 100.0 | % | ||||||||
Property Type | ||||||||||||||||
Office | $ | 15,307 | 42.6 | % | $ | 15,216 | 43.9 | % | ||||||||
Retail | 8,038 | 22.3 | 7,334 | 21.1 | ||||||||||||
Apartments | 4,113 | 11.4 | 4,368 | 12.6 | ||||||||||||
Hotel | 3,078 | 8.6 | 3,258 | 9.4 | ||||||||||||
Industrial | 2,901 | 8.1 | 2,622 | 7.6 | ||||||||||||
Other | 2,528 | 7.0 | 1,859 | 5.4 | ||||||||||||
Total | $ | 35,965 | 100.0 | % | $ | 34,657 | 100.0 | % | ||||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 197 | $ | 182 | $ | 172 | ||||||
Additions | 200 | 76 | 36 | |||||||||
Deductions | (93 | ) | (61 | ) | (26 | ) | ||||||
Balance at December 31, | $ | 304 | $ | 197 | $ | 182 | ||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Impaired loans with valuation allowances | $ | 259 | $ | 622 | ||||
Impaired loans without valuation allowances | 52 | 44 | ||||||
Subtotal | 311 | 666 | ||||||
Less: Valuation allowances on impaired loans | 69 | 72 | ||||||
Impaired loans | $ | 242 | $ | 594 | ||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Real estate | $ | 5,441 | $ | 5,167 | ||||
Accumulated depreciation | (1,378 | ) | (1,210 | ) | ||||
Net real estate | 4,063 | 3,957 | ||||||
Real estate joint ventures | 3,522 | 2,771 | ||||||
Real estate and real estate joint ventures | 7,585 | 6,728 | ||||||
Real estate held-for sale | 1 | 39 | ||||||
Total real estate holdings | $ | 7,586 | $ | 6,767 | ||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Office | $ | 3,489 | 46 | % | $ | 3,480 | 51 | % | ||||||||
Apartments | 1,602 | 21 | 1,148 | 17 | ||||||||||||
Real estate investment funds | 1,080 | 14 | 950 | 14 | ||||||||||||
Industrial | 483 | 7 | 443 | 7 | ||||||||||||
Retail | 472 | 6 | 455 | 7 | ||||||||||||
Hotel | 180 | 3 | 60 | 1 | ||||||||||||
Land | 155 | 2 | 125 | 2 | ||||||||||||
Agriculture | 24 | — | 29 | — | ||||||||||||
Other | 101 | 1 | 77 | 1 | ||||||||||||
Total real estate holdings | $ | 7,586 | 100 | % | $ | 6,767 | 100 | % | ||||||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Freestanding derivatives with positive fair values | $ | 12,306 | 71.3 | % | $ | 4,036 | 50.0 | % | ||||||||
Leveraged leases, net of non-recourse debt | 2,146 | 12.4 | 2,059 | 25.5 | ||||||||||||
Joint venture investments | 751 | 4.4 | 622 | 7.7 | ||||||||||||
Tax credit partnerships | 503 | 2.9 | — | — | ||||||||||||
Funding agreements | 394 | 2.3 | 383 | 4.7 | ||||||||||||
Mortgage servicing rights | 191 | 1.1 | — | — | ||||||||||||
Funds withheld | 62 | 0.4 | 80 | 1.0 | ||||||||||||
Other | 895 | 5.2 | 896 | 11.1 | ||||||||||||
Total | $ | 17,248 | 100.0 | % | $ | 8,076 | 100.0 | % | ||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Rental receivables, net | $ | 1,486 | $ | 1,491 | ||||
Estimated residual values | 1,913 | 1,881 | ||||||
Subtotal | 3,399 | 3,372 | ||||||
Unearned income | (1,253 | ) | (1,313 | ) | ||||
Investment in leveraged leases | $ | 2,146 | $ | 2,059 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Income from investment in leveraged leases (included in net investment income) | $ | 116 | $ | 68 | $ | 55 | ||||||
Less: Income tax expense on leveraged leases | (40 | ) | (24 | ) | (18 | ) | ||||||
Net income from investment in leveraged leases | $ | 76 | $ | 44 | $ | 37 | ||||||
Carrying Value | ||||
(In millions) | ||||
Fair value on December 31, 2007 | $ | — | ||
Acquisition of mortgage servicing rights | 350 | |||
Reduction due to loan payments | (10 | ) | ||
Reduction due to sales | — | |||
Changes in fair value due to: | ||||
Changes in valuation model inputs or assumptions | (149 | ) | ||
Other changes in fair value | — | |||
Fair value on December 31, 2008 | $ | 191 | ||
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December 31, 2008 | ||||||||
Total Assets | Total Liabilities | |||||||
(In millions) | ||||||||
MRSC collateral financing arrangement (1) | $ | 2,361 | $ | — | ||||
Real estate joint ventures (2) | 26 | 15 | ||||||
Other limited partnership interests (3) | 20 | 3 | ||||||
Other invested assets (4) | 10 | 3 | ||||||
Total | $ | 2,417 | $ | 21 | ||||
(1) | These assets are reflected at estimated fair value, and consist of fixed maturity securities available-for-sale of $2,137 million and cash and cash equivalents of $224 million, of which $60 million is cashheld-in-trust. Included within fixed maturity securities available-for-sale are $948 million of U.S. corporate securities, $561 million of residential mortgage-backed securities, $409 million of asset-backed securities, $98 million of commercial mortgage-backed securities, $95 million of foreign corporate securities, $21 million of state and political subdivision securities and $5 million of foreign government securities. See Note 11. | |
(2) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets consist of $20 million of real estate and real estate joint ventures held-for-investment, $5 million of cash and cash equivalents and $1 million of other assets. The liabilities of $15 million are included within other liabilities. | |
(3) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets of $20 million are included within other limited partnership interests while the liabilities of $3 million are included within other liabilities. | |
(4) | Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. The assets of $10 million are included within other invested assets. The liabilities consist of $2 million of long-term debt and $1 million of other liabilities. |
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December 31, 2008 | ||||||||
Maximum | ||||||||
Carrying | Exposure | |||||||
Amount (1) | to Loss (2) | |||||||
(In millions) | ||||||||
Fixed maturity securities available-for-sale: | ||||||||
Foreign corporate securities | $ | 1,080 | $ | 1,080 | ||||
U.S. Treasury/agency securities | 992 | 992 | ||||||
Real estate joint ventures | 32 | 32 | ||||||
Other limited partnership interests | 3,496 | 4,004 | ||||||
Other invested assets | 318 | 108 | ||||||
Total | $ | 5,918 | $ | 6,216 | ||||
(1) | See Note 1 for further discussion of the Company’s significant accounting policies with regards to the carrying amounts of these investments. | |
(2) | The maximum exposure to loss relating to the fixed maturity securities available-for-sale and equity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company’s return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by third parties. |
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4. | Derivative Financial Instruments |
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||
Notional | or Fair Value | Notional | or Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 34,060 | $ | 4,617 | $ | 1,468 | $ | 62,410 | $ | 784 | $ | 768 | ||||||||||||
Interest rate floors | 48,517 | 1,748 | — | 48,937 | 621 | — | ||||||||||||||||||
Interest rate caps | 24,643 | 11 | — | 45,498 | 50 | — | ||||||||||||||||||
Financial futures | 19,908 | 45 | 205 | 12,302 | 89 | 57 | ||||||||||||||||||
Foreign currency swaps | 19,438 | 1,953 | 1,866 | 21,201 | 1,480 | 1,719 | ||||||||||||||||||
Foreign currency forwards | 5,167 | 153 | 129 | 4,177 | 76 | 16 | ||||||||||||||||||
Options | 8,450 | 3,162 | 35 | 6,565 | 713 | 1 | ||||||||||||||||||
Financial forwards | 28,176 | 465 | 169 | 11,937 | 122 | 2 | ||||||||||||||||||
Credit default swaps | 5,219 | 152 | 69 | 6,625 | 58 | 33 | ||||||||||||||||||
Synthetic GICs | 4,260 | — | — | 3,670 | — | — | ||||||||||||||||||
Other | 250 | — | 101 | 250 | 43 | — | ||||||||||||||||||
Total | $ | 198,088 | $ | 12,306 | $ | 4,042 | $ | 223,572 | $ | 4,036 | $ | 2,596 | ||||||||||||
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 | $ | 2,295 | $ | 12,632 | $ | 12,809 | $ | 6,324 | $ | 34,060 | ||||||||||
Interest rate floors | 15,294 | 325 | 32,898 | — | 48,517 | |||||||||||||||
Interest rate caps | 590 | 24,053 | — | — | 24,643 | |||||||||||||||
Financial futures | 19,908 | — | — | — | 19,908 | |||||||||||||||
Foreign currency swaps | 3,204 | 7,180 | 5,981 | 3,073 | 19,438 | |||||||||||||||
Foreign currency forwards | 5,068 | 99 | — | — | 5,167 | |||||||||||||||
Options | 128 | 2,239 | 5,419 | 664 | 8,450 | |||||||||||||||
Financial forwards | 16,617 | 995 | 8,226 | 2,338 | 28,176 | |||||||||||||||
Credit default swaps | 163 | 3,340 | 1,716 | — | 5,219 | |||||||||||||||
Synthetic GICs | 4,260 | — | — | — | 4,260 | |||||||||||||||
Other | — | 250 | — | — | 250 | |||||||||||||||
Total | $ | 67,527 | $ | 51,113 | $ | 67,049 | $ | 12,399 | $ | 198,088 | ||||||||||
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December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair value | $ | 10,234 | $ | 1,805 | $ | 703 | $ | 10,006 | $ | 650 | $ | 99 | ||||||||||||
Cash flow | 4,068 | 463 | 387 | 4,717 | 161 | 321 | ||||||||||||||||||
Foreign operations | 1,834 | 33 | 50 | 1,674 | 11 | 114 | ||||||||||||||||||
Non-qualifying | 181,952 | 10,005 | 2,902 | 207,175 | 3,214 | 2,062 | ||||||||||||||||||
Total | $ | 198,088 | $ | 12,306 | $ | 4,042 | $ | 223,572 | $ | 4,036 | $ | 2,596 | ||||||||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Qualifying hedges: | ||||||||||||
Net investment income | $ | 19 | $ | 29 | $ | 49 | ||||||
Interest credited to policyholder account balances | 105 | (34 | ) | (35 | ) | |||||||
Other expenses | (9 | ) | 1 | 3 | ||||||||
Non-qualifying hedges: | ||||||||||||
Net investment income | 1 | (5 | ) | — | ||||||||
Net investment gains (losses) | 49 | 278 | 296 | |||||||||
Other revenues | 3 | — | — | |||||||||
Total | $ | 168 | $ | 269 | $ | 313 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Changes in the fair value of derivatives | $ | 245 | $ | 334 | $ | 276 | ||||||
Changes in the fair value of the items hedged | (248 | ) | (326 | ) | (276 | ) | ||||||
Net ineffectiveness of fair value hedging activities | $ | (3 | ) | $ | 8 | $ | — | |||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Other comprehensive income (loss) balance at January 1, | $ | (270 | ) | $ | (208 | ) | $ | (142 | ) | |||
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges | 203 | (168 | ) | 80 | ||||||||
Amounts reclassified to net investment gains (losses) | 140 | 96 | (158 | ) | ||||||||
Amounts reclassified to net investment income | 9 | 13 | 15 | |||||||||
Amortization of transition adjustment | 1 | (1 | ) | (1 | ) | |||||||
Amounts reclassified to other expenses | (1 | ) | (2 | ) | (2 | ) | ||||||
Other comprehensive income (loss) balance at December 31, | $ | 82 | $ | (270 | ) | $ | (208 | ) | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net investment gains (losses), excluding embedded derivatives | $ | 6,688 | $ | (227 | ) | $ | (686 | ) | ||||
Policyholder benefits and claims (1) | 331 | 7 | (33 | ) | ||||||||
Net investment income (loss) (2) | 240 | 31 | (40 | ) | ||||||||
Other revenues (3) | 146 | — | — | |||||||||
Total | $ | 7,405 | $ | (189 | ) | $ | (759 | ) | ||||
(1) | Changes in estimated fair value related to economic hedges of liabilities embedded in certain variable annuity products offered by the Company. | |
(2) | Changes in estimated fair value related to economic hedges of equity method investments in joint ventures that do not qualify for hedge accounting and changes in estimated fair value related to derivatives held in relation to trading portfolios. | |
(3) | Changes in estimated fair value related to derivatives held in connection with the Company’s mortgage banking activities. |
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Net embedded derivatives within asset host contracts: | ||||||||
Ceded guaranteed minimum benefit riders | $ | 205 | $ | 6 | ||||
Call options in equity securities | (173 | ) | (16 | ) | ||||
Net embedded derivatives within asset host contracts | $ | 32 | $ | (10 | ) | |||
Net embedded derivatives within liability host contracts: | ||||||||
Direct guaranteed minimum benefit riders | $ | 3,134 | $ | 284 | ||||
Other | (83 | ) | 52 | |||||
Net embedded derivatives within liability host contracts | $ | 3,051 | $ | 336 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net investment gains (losses) (1) | $ | (2,650 | ) | $ | (321 | ) | $ | 202 | ||||
Policyholder benefits and claims | $ | 182 | $ | — | $ | — |
(1) | Effective January 1, 2008, upon adoption of SFAS 157, the valuation of the Company’s guaranteed minimum benefit riders includes an adjustment for the Company’s own credit. Included in net investment gains (losses) for the year ended December 31, 2008 are gains of $2,994 million in connection with this adjustment. |
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December 31, 2008 | ||||||||||||
Maximum Amount of | ||||||||||||
Fair Value of | Future Payments | |||||||||||
Credit Default | under Credit | Weighted Average | ||||||||||
Rating Agency Designation of Referenced Credit Obligations (1) | Swaps | Default Swaps (2) | Years to Maturity (3) | |||||||||
(In millions) | ||||||||||||
Aaa/Aa/A | ||||||||||||
Single name credit default swaps (corporate) | $ | 1 | $ | 143 | 5.0 | |||||||
Credit default swaps referencing indices | (33 | ) | 1,372 | 4.1 | ||||||||
Subtotal | (32 | ) | 1,515 | 4.2 | ||||||||
Baa | ||||||||||||
Single name credit default swaps (corporate) | 2 | 110 | 2.6 | |||||||||
Credit default swaps referencing indices | (5 | ) | 215 | 4.1 | ||||||||
Subtotal | (3 | ) | 325 | 3.6 | ||||||||
Ba | ||||||||||||
Single name credit default swaps (corporate) | — | 25 | 1.6 | |||||||||
Credit default swaps referencing indices | — | — | — | |||||||||
Subtotal | — | 25 | 1.6 | |||||||||
B | ||||||||||||
Single name credit default swaps (corporate) | — | — | — | |||||||||
Credit default swaps referencing indices | (2 | ) | 10 | 5.0 | ||||||||
Subtotal | (2 | ) | 10 | 5.0 | ||||||||
Caa and lower | ||||||||||||
Single name credit default swaps (corporate) | — | — | — | |||||||||
Credit default swaps referencing indices | — | — | — | |||||||||
Subtotal | — | — | — | |||||||||
In or near default | ||||||||||||
Single name credit default swaps (corporate) | — | — | — | |||||||||
Credit default swaps referencing indices | — | — | — | |||||||||
Subtotal | — | — | — | |||||||||
$ | (37 | ) | $ | 1,875 | 4.0 | |||||||
(1) | The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. | |
(2) | Assumes the value of the referenced credit obligations is zero. | |
(3) | The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. |
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5. | Deferred Policy Acquisition Costs and Value of Business Acquired |
DAC | VOBA | Total | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, 2006 | $ | 12,005 | $ | 4,643 | $ | 16,648 | ||||||
Capitalizations | 2,825 | — | 2,825 | |||||||||
Subtotal | 14,830 | 4,643 | 19,473 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | (160 | ) | (74 | ) | (234 | ) | ||||||
Other expenses | 1,747 | 391 | 2,138 | |||||||||
Total amortization | 1,587 | 317 | 1,904 | |||||||||
Less: Unrealized investment gains (losses) | 79 | 31 | 110 | |||||||||
Less: Other | (48 | ) | 3 | (45 | ) | |||||||
Balance at December 31, 2006 | 13,212 | 4,292 | 17,504 | |||||||||
Effect ofSOP 05-1 adoption | (205 | ) | (248 | ) | (453 | ) | ||||||
Capitalizations | 3,064 | — | 3,064 | |||||||||
Acquisitions | — | 48 | 48 | |||||||||
Subtotal | 16,071 | 4,092 | 20,163 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | (115 | ) | (11 | ) | (126 | ) | ||||||
Other expenses | 1,881 | 495 | 2,376 | |||||||||
Total amortization | 1,766 | 484 | 2,250 | |||||||||
Less: Unrealized investment gains (losses) | 75 | 63 | 138 | |||||||||
Less: Other | (30 | ) | (5 | ) | (35 | ) | ||||||
Balance at December 31, 2007 | 14,260 | 3,550 | 17,810 | |||||||||
Capitalizations | 3,092 | — | 3,092 | |||||||||
Acquisitions | — | (5 | ) | (5 | ) | |||||||
Subtotal | 17,352 | 3,545 | 20,897 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | 489 | 32 | 521 | |||||||||
Other expenses | 2,460 | 508 | 2,968 | |||||||||
Total amortization | 2,949 | 540 | 3,489 | |||||||||
Less: Unrealized investment gains (losses) | (2,753 | ) | (599 | ) | (3,352 | ) | ||||||
Less: Other | 503 | 113 | 616 | |||||||||
Balance at December 31, 2008 | $ | 16,653 | $ | 3,491 | $ | 20,144 | ||||||
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DAC | VOBA | Total | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional: | ||||||||||||||||||||||||
Group life | $ | 74 | $ | 79 | $ | 9 | $ | 17 | $ | 83 | $ | 96 | ||||||||||||
Retirement & savings | 31 | 33 | 1 | 1 | 32 | 34 | ||||||||||||||||||
Non-medical health & other | 898 | 793 | — | — | 898 | 793 | ||||||||||||||||||
Subtotal | 1,003 | 905 | 10 | 18 | 1,013 | 923 | ||||||||||||||||||
Individual: | ||||||||||||||||||||||||
Traditional life | 5,813 | 4,115 | 154 | 46 | 5,967 | 4,161 | ||||||||||||||||||
Variable & universal life | 3,682 | 3,241 | 968 | 1,087 | 4,650 | 4,328 | ||||||||||||||||||
Annuities | 3,971 | 3,724 | 1,917 | 1,825 | 5,888 | 5,549 | ||||||||||||||||||
Other | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 13,466 | 11,080 | 3,039 | 2,958 | 16,505 | 14,038 | ||||||||||||||||||
International: | ||||||||||||||||||||||||
Latin America region | 432 | 471 | 341 | 423 | 773 | 894 | ||||||||||||||||||
European region | 303 | 216 | 22 | 35 | 325 | 251 | ||||||||||||||||||
Asia Pacific region | 1,263 | 1,391 | 75 | 112 | 1,338 | 1,503 | ||||||||||||||||||
Subtotal | 1,998 | 2,078 | 438 | 570 | 2,436 | 2,648 | ||||||||||||||||||
Auto & Home | 183 | 193 | — | — | 183 | 193 | ||||||||||||||||||
Corporate & Other | 3 | 4 | 4 | 4 | 7 | 8 | ||||||||||||||||||
Total | $ | 16,653 | $ | 14,260 | $ | 3,491 | $ | 3,550 | $ | 20,144 | $ | 17,810 | ||||||||||||
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6. | Goodwill |
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at beginning of the period | $ | 4,814 | $ | 4,801 | $ | 4,701 | ||||||
Acquisitions (1) | 256 | 2 | 93 | |||||||||
Other, net (2) | (62 | ) | 11 | 7 | ||||||||
Balance at the end of the period | $ | 5,008 | $ | 4,814 | $ | 4,801 | ||||||
(1) | See Note 2 for a description of acquisitions and dispositions. | |
(2) | Consisting principally of foreign currency translation adjustments. |
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Institutional: | ||||||||
Group life | $ | 15 | $ | 15 | ||||
Retirement & savings | 887 | 887 | ||||||
Non-medical health & other | 149 | 76 | ||||||
Subtotal | 1,051 | 978 | ||||||
Individual: | ||||||||
Traditional life | 73 | 73 | ||||||
Variable & universal life | 1,174 | 1,174 | ||||||
Annuities | 1,692 | 1,692 | ||||||
Other | 18 | 18 | ||||||
Subtotal | 2,957 | 2,957 | ||||||
International: | ||||||||
Latin America region | 184 | 104 | ||||||
European region | 37 | 50 | ||||||
Asia Pacific region | 152 | 159 | ||||||
Subtotal | 373 | 313 | ||||||
Auto & Home | 157 | 157 | ||||||
Corporate & Other (1) | 470 | 409 | ||||||
Total | $ | 5,008 | $ | 4,814 | ||||
(1) | The allocation of the goodwill to the reporting units was performed at the time of the respective acquisition. The $470 million of goodwill within Corporate & Other relates to goodwill acquired as a part of the Travelers acquisition of $405 million, as well as acquisitions by MetLife Bank which resides within Corporate & Other. For purposes of goodwill impairment testing at December 31, 2008 and 2007, the $405 million of Corporate & |
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Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual segment was attributed $210 million, (traditional life — $23 million, variable & universal life — $11 million and annuities — $176 million) and the Institutional segment was attributed $195 million, (group life — $2 million, retirement & savings — $186 million, and non-medical health & other — $7 million) at both December 31, 2008 and 2007. |
7. | Insurance |
Future Policy | Policyholder Account | Other Policyholder | ||||||||||||||||||||||
Benefits | Balances | Funds | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||
Group life | $ | 3,346 | $ | 3,326 | $ | 14,044 | $ | 13,997 | $ | 2,532 | $ | 2,364 | ||||||||||||
Retirement & savings | 40,320 | 37,947 | 60,787 | 51,585 | 58 | 213 | ||||||||||||||||||
Non-medical health & other | 11,619 | 10,617 | 501 | 501 | 609 | 597 | ||||||||||||||||||
Individual | ||||||||||||||||||||||||
Traditional life | 52,968 | 52,378 | 1 | 1 | 1,423 | 1,478 | ||||||||||||||||||
Variable & universal life | 1,129 | 949 | 15,062 | 14,583 | 1,452 | 1,417 | ||||||||||||||||||
Annuities | 3,655 | 3,055 | 44,282 | 37,785 | 88 | 76 | ||||||||||||||||||
Other | 2 | — | 2,524 | 2,398 | 1 | 1 | ||||||||||||||||||
International | 9,241 | 9,825 | 5,654 | 4,961 | 1,227 | 1,296 | ||||||||||||||||||
Auto & Home | 3,083 | 3,273 | — | — | 43 | 51 | ||||||||||||||||||
Corporate & Other | 5,192 | 4,646 | 6,950 | 4,531 | 329 | 345 | ||||||||||||||||||
Total | $ | 130,555 | $ | 126,016 | $ | 149,805 | $ | 130,342 | $ | 7,762 | $ | 7,838 | ||||||||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 706 | $ | 708 | $ | 715 | ||||||
Acquisitions | 144 | 11 | — | |||||||||
Amortization | (25 | ) | (16 | ) | (6 | ) | ||||||
Other | (3 | ) | 3 | (1 | ) | |||||||
Balance at December 31, | $ | 822 | $ | 706 | $ | 708 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 677 | $ | 578 | $ | 414 | ||||||
Capitalization | 176 | 181 | 194 | |||||||||
Amortization | (142 | ) | (82 | ) | (30 | ) | ||||||
Balance at December 31, | $ | 711 | $ | 677 | $ | 578 | ||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Fixed maturity securities | $ | 21 | $ | 35 | ||||
Equity securities | $ | 19 | $ | 41 | ||||
Cash and cash equivalents | $ | 3 | $ | 5 |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 7,836 | $ | 7,244 | $ | 6,977 | ||||||
Less: Reinsurance recoverables | (955 | ) | (937 | ) | (940 | ) | ||||||
Net balance at January 1, | 6,881 | 6,307 | 6,037 | |||||||||
Incurred related to: | ||||||||||||
Current year | 6,263 | 5,796 | 5,064 | |||||||||
Prior years | (353 | ) | (325 | ) | (329 | ) | ||||||
5,910 | 5,471 | 4,735 | ||||||||||
Paid related to: | ||||||||||||
Current year | (3,861 | ) | (3,297 | ) | (2,975 | ) | ||||||
Prior years | (1,712 | ) | (1,600 | ) | (1,490 | ) | ||||||
(5,573 | ) | (4,897 | ) | (4,465 | ) | |||||||
Net balance at December 31, | 7,218 | 6,881 | 6,307 | |||||||||
Add: Reinsurance recoverables | 1,042 | 955 | 937 | |||||||||
Balance at December 31, | $ | 8,260 | $ | 7,836 | $ | 7,244 | ||||||
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December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
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 | $ | 15,882 | N/A | $ | 18,573 | N/A | ||||||||||
Net amount at risk (2) | $ | 4,384 | (3) | N/A | $ | 52 | (3) | N/A | ||||||||
Average attained age of contractholders | 62 years | N/A | 61 years | N/A | ||||||||||||
Anniversary Contract Value or Minimum Return | ||||||||||||||||
Separate account value | $ | 62,345 | $ | 24,328 | $ | 87,168 | $ | 29,603 | ||||||||
Net amount at risk (2) | $ | 18,637 | (3) | $ | 11,312 | (4) | $ | 2,331 | (3) | $ | 441 | (4) | ||||
Average attained age of contractholders | 60 years | 61 years | 58 years | 60 years | ||||||||||||
Two Tier Annuities | ||||||||||||||||
General account value | N/A | $ | 283 | N/A | $ | 286 | ||||||||||
Net amount at risk (2) | N/A | $ | 50 | (5) | N/A | $ | 51 | (5) | ||||||||
Average attained age of contractholders | N/A | 60 years | N/A | 60 years |
December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Secondary | Paid-Up | Secondary | Paid-Up | |||||||||||||
Guarantees | Guarantees | Guarantees | Guarantees | |||||||||||||
(In millions) | ||||||||||||||||
Universal and Variable Life Contracts (1) | ||||||||||||||||
Account value (general and separate account) | $ | 7,825 | $ | 4,135 | $ | 9,347 | $ | 4,302 | ||||||||
Net amount at risk (2) | $ | 145,927 | (3) | $ | 31,274 | (3) | $ | 141,840 | (3) | $ | 33,855 | (3) | ||||
Average attained age of policyholders | 50 years | 56 years | 49 years | 55 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. | |
(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. |
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Universal and Variable | ||||||||||||||||||||
Annuity Contracts | Life Contracts | |||||||||||||||||||
Guaranteed | Guaranteed | Paid | ||||||||||||||||||
Death | Annuitization | Secondary | Up | |||||||||||||||||
Benefits | Benefits | Guarantees | Guarantees | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Balance at January 1, 2006 | $ | 41 | $ | 29 | $ | 15 | $ | 39 | $ | 124 | ||||||||||
Incurred guaranteed benefits | 18 | 7 | 29 | 1 | 55 | |||||||||||||||
Paid guaranteed benefits | (6 | ) | — | — | — | (6 | ) | |||||||||||||
Balance at December 31, 2006 | 53 | 36 | 44 | 40 | 173 | |||||||||||||||
Incurred guaranteed benefits | 29 | 38 | 53 | 6 | 126 | |||||||||||||||
Paid guaranteed benefits | (8 | ) | — | — | — | (8 | ) | |||||||||||||
Balance at December 31, 2007 | 74 | 74 | 97 | 46 | 291 | |||||||||||||||
Incurred guaranteed benefits | 249 | 329 | 94 | 4 | 676 | |||||||||||||||
Paid guaranteed benefits | (80 | ) | — | — | — | (80 | ) | |||||||||||||
Balance at December 31, 2008 | $ | 243 | $ | 403 | $ | 191 | $ | 50 | $ | 887 | ||||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Mutual Fund Groupings | ||||||||
Equity | $ | 39,842 | $ | 69,477 | ||||
Balanced | 14,548 | 15,977 | ||||||
Bond | 5,671 | 6,284 | ||||||
Money Market | 2,456 | 1,775 | ||||||
Specialty | 488 | 870 | ||||||
Total | $ | 63,005 | $ | 94,383 | ||||
8. | Reinsurance |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Premiums: | ||||||||||||
Direct premiums | $ | 27,058 | $ | 24,149 | $ | 23,308 | ||||||
Reinsurance assumed | 1,466 | 1,192 | 928 | |||||||||
Reinsurance ceded | (2,610 | ) | (2,371 | ) | (2,184 | ) | ||||||
Net premiums | $ | 25,914 | $ | 22,970 | $ | 22,052 | ||||||
Universal life and investment-type product policy fees: | ||||||||||||
Direct universal life and investment-type product policy fees | $ | 5,909 | $ | 5,686 | $ | 5,146 | ||||||
Reinsurance assumed | 79 | 54 | 20 | |||||||||
Reinsurance ceded | (607 | ) | (502 | ) | (455 | ) | ||||||
Net universal life and investment-type product policy fees | $ | 5,381 | $ | 5,238 | $ | 4,711 | ||||||
Policyholder benefits and claims: | ||||||||||||
Direct policyholder benefits and claims | $ | 29,772 | $ | 25,507 | $ | 24,649 | ||||||
Reinsurance assumed | 1,235 | 804 | 847 | |||||||||
Reinsurance ceded | (3,570 | ) | (2,528 | ) | (2,627 | ) | ||||||
Net policyholder benefits and claims | $ | 27,437 | $ | 23,783 | $ | 22,869 | ||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Future policy benefit recoverables | $ | 8,258 | $ | 6,842 | ||||
Deposit recoverables | 2,258 | 2,616 | ||||||
Claim recoverables | 319 | 271 | ||||||
All other recoverables | 232 | 48 | ||||||
Total | $ | 11,067 | $ | 9,777 | ||||
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9. | Closed Block |
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Closed Block Liabilities | ||||||||
Future policy benefits | $ | 43,520 | $ | 43,362 | ||||
Other policyholder funds | 315 | 323 | ||||||
Policyholder dividends payable | 711 | 709 | ||||||
Policyholder dividend obligation | — | 789 | ||||||
Payables for collateral under securities loaned and other transactions | 2,852 | 5,610 | ||||||
Other liabilities | 254 | 290 | ||||||
Total closed block liabilities | 47,652 | 51,083 | ||||||
Assets Designated to the Closed Block | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $27,947 and $29,631, respectively) | 26,205 | 30,481 | ||||||
Equity securities available-for-sale, at estimated fair value (cost: $280 and $1,555, respectively) | 210 | 1,875 | ||||||
Mortgage loans on real estate | 7,243 | 7,472 | ||||||
Policy loans | 4,426 | 4,290 | ||||||
Real estate and real estate joint ventures held-for-investment | 381 | 297 | ||||||
Short-term investments | 52 | 14 | ||||||
Other invested assets | 952 | 829 | ||||||
Total investments | 39,469 | 45,258 | ||||||
Cash and cash equivalents | 262 | 333 | ||||||
Accrued investment income | 484 | 485 | ||||||
Deferred income tax assets | 1,632 | 640 | ||||||
Premiums and other receivables | 98 | 151 | ||||||
Total assets designated to the closed block | 41,945 | 46,867 | ||||||
Excess of closed block liabilities over assets designated to the closed block | 5,707 | 4,216 | ||||||
Amounts included in accumulated other comprehensive income (loss): | ||||||||
Unrealized investment gains (losses), net of income tax of ($633) and $424, respectively | (1,174 | ) | 751 | |||||
Unrealized gains (losses) on derivative instruments, net of income tax of ($8) and ($19), respectively | (15 | ) | (33 | ) | ||||
Allocated $284, net of income tax, to policyholder dividend obligation at December 31, 2007 | — | (505 | ) | |||||
Total amounts included in accumulated other comprehensive income (loss) | (1,189 | ) | 213 | |||||
Maximum future earnings to be recognized from closed block assets and liabilities | $ | 4,518 | $ | 4,429 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 789 | $ | 1,063 | $ | 1,607 | ||||||
Impact on revenues, net of expenses and income tax | — | — | (114 | ) | ||||||||
Change in unrealized investment and derivative gains (losses) | (789 | ) | (274 | ) | (430 | ) | ||||||
Balance at December 31, | $ | — | $ | 789 | $ | 1,063 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 2,787 | $ | 2,870 | $ | 2,959 | ||||||
Net investment income and other revenues | 2,248 | 2,350 | 2,355 | |||||||||
Net investment gains (losses) | (84 | ) | 28 | (130 | ) | |||||||
Total revenues | 4,951 | 5,248 | 5,184 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 3,393 | 3,457 | 3,474 | |||||||||
Policyholder dividends | 1,498 | 1,492 | 1,479 | |||||||||
Change in policyholder dividend obligation | — | — | (114 | ) | ||||||||
Other expenses | 217 | 231 | 247 | |||||||||
Total expenses | 5,108 | 5,180 | 5,086 | |||||||||
Revenues, net of expenses before income tax | (157 | ) | 68 | 98 | ||||||||
Income tax | (68 | ) | 21 | 34 | ||||||||
Revenues, net of expenses and income tax from continuing operations | (89 | ) | 47 | 64 | ||||||||
Revenues, net of expenses and income tax from discontinued operations | — | — | 1 | |||||||||
Revenues, net of expenses, income taxes and discontinued operations | $ | (89 | ) | $ | 47 | $ | 65 | |||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, | $ | 4,518 | $ | 4,429 | $ | 4,480 | ||||||
Less: | ||||||||||||
Cumulative effect of a change in accounting principle, net of income tax | — | (4 | ) | — | ||||||||
Balance at January 1, | 4,429 | 4,480 | 4,545 | |||||||||
Change during year | $ | 89 | $ | (47 | ) | $ | (65 | ) | ||||
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10. | Long-term and Short-term Debt |
Interest Rates | ||||||||||||||||||
Weighted | December 31, | |||||||||||||||||
Range | Average | Maturity | 2008 | 2007 | ||||||||||||||
(In millions) | ||||||||||||||||||
Senior notes | 5.00%-6.82% | 6.04% | 2011-2035 | $ | 7,660 | $ | 7,017 | |||||||||||
Repurchase agreements | 2.54%-5.65% | 3.76% | 2009-2013 | 1,062 | 1,213 | |||||||||||||
Surplus notes | 7.63%-7.88% | 7.86% | 2015-2025 | 698 | 697 | |||||||||||||
Fixed rate notes | 5.50%-8.02% | 8.02% | 2010 | 65 | 43 | |||||||||||||
Other notes with varying interest rates | 3.44%-12.00% | 3.65% | 2009-2016 | 134 | 75 | |||||||||||||
Capital lease obligations | 48 | 55 | ||||||||||||||||
Total long-term debt | 9,667 | 9,100 | ||||||||||||||||
Total short-term debt | 2,659 | 667 | ||||||||||||||||
Total | $ | 12,326 | $ | 9,767 | ||||||||||||||
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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) | $ | 2,850 | $ | 2,313 | $ | — | $ | 537 | ||||||||||
MetLife Bank, N.A | July 2009 | (2) | 300 | — | 100 | 200 | ||||||||||||||
Total | $ | 3,150 | $ | 2,313 | $ | 100 | $ | 737 | ||||||||||||
(1) | In December 2008, the Holding Company and MetLife Funding, Inc. entered into an amended and restated $2.85 billion credit agreement with various financial institutions. The agreement amended and restated the $3.0 billion credit agreement entered into in June 2007. Proceeds 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. Fees for this agreement include a 0.25% facility fee, 0.075% fronting fee, a letter of credit fee between 1% and 5% based on certain market rates and a 0.05% utilization fee, as applicable, and may vary based on MetLife, Inc.’s senior unsecured ratings. The Holding Company and MetLife Funding, Inc. incurred amendment costs of $11 million related to the $2,850 million amended and restated credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. The Holding Company did not have any deferred financing costs associated with the original June 2007 credit agreement. | |
(2) | In July 2008, the facility was increased by $100 million and its maturity extended for one year to July 2009. Fees for this agreement include a commitment fee of $10,000 and a margin of Federal Funds plus 0.11%, as applicable. |
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Letter of | ||||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
MetLife, Inc. | August 2009 | (1) | $ | 500 | $ | — | $ | 500 | $ | — | — | |||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 | (3) | 500 | — | 490 | 10 | 7 | |||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 | (2), (4) | 650 | — | 410 | 240 | 19 | |||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | (5) | 3,500 | 2,692 | — | 808 | 29 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 | (2), (6) | 2,896 | — | 1,359 | 1,537 | 29 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 | (2), (7) | 3,500 | — | 1,500 | 2,000 | 29 | |||||||||||||||||
Total | $ | 11,546 | $ | 2,692 | $ | 4,259 | $ | 4,595 | ||||||||||||||||
(1) | In December 2008, the Holding Company entered into an amended and restated one year $500 million letter of credit facility (dated as of August 2008 and amended and restated at December 31, 2008) with an unaffiliated financial institution. Exeter Reassurance Company, Ltd. (“Exeter”) is a co-applicant under this letter of credit facility. This letter of credit facility matures in August 2009, except that letters of credit outstanding upon termination may remain outstanding until August 2010. Fees for this agreement include a margin of 2.25% and a utilization fee of 0.05%, as applicable. The Holding Company incurred amendment costs of $1.3 million related to the $500 million amended and restated letter of credit facility, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | 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. | |
(4) | In December 2008, Exeter, as borrower, and the Holding Company, as guarantor, entered into an amendment of an existing credit agreement with an unaffiliated financial institution. Issuances under this facility are set to expire in December 2027. Exeter incurred amendment costs of $1.6 million related to the amendment of the existing credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(5) | 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. At December 31, 2008, $2.7 billion had been drawn upon under the collateral financing arrangement. | |
(6) | In December 2007, Exeter Reassurance Company Ltd. terminated four letters of credit, with expirations from March 2025 through December 2026, which 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 |
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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. | ||
(7) | In September 2008, MRV and the Holding Company entered into a30-year, $3.5 billion letter of credit facility with an unaffiliated financial institution. These letters of credit serve as collateral for MRV’s obligations under a reinsurance agreement. |
11. | Collateral Financing Arrangements |
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12. | Junior Subordinated Debentures |
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13. | Common Equity Units |
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14. | Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts |
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15. | Income Tax |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 216 | $ | 424 | $ | 615 | ||||||
State and local | 10 | 15 | 39 | |||||||||
Foreign | 372 | 200 | 144 | |||||||||
Subtotal | 598 | 639 | 798 | |||||||||
Deferred: | ||||||||||||
Federal | 1,078 | 1,015 | 164 | |||||||||
State and local | (6 | ) | 31 | 2 | ||||||||
Foreign | (90 | ) | (25 | ) | 52 | |||||||
Subtotal | 982 | 1,021 | 218 | |||||||||
Provision for income tax | $ | 1,580 | $ | 1,660 | $ | 1,016 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Tax provision at U.S. statutory rate | $ | 1,781 | $ | 2,017 | $ | 1,374 | ||||||
Tax effect of: | ||||||||||||
Tax-exempt investment income | (254 | ) | (296 | ) | (296 | ) | ||||||
State and local income tax | 2 | 39 | 23 | |||||||||
Prior year tax | 53 | 70 | (10 | ) | ||||||||
Foreign tax rate differential and change in valuation allowance | 5 | (116 | ) | (55 | ) | |||||||
Other, net | (7 | ) | (54 | ) | (20 | ) | ||||||
Provision for income tax | $ | 1,580 | $ | 1,660 | $ | 1,016 | ||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Deferred income tax assets: | ||||||||
Policyholder liabilities and receivables | $ | 5,553 | $ | 4,092 | ||||
Net operating loss carryforwards | 741 | 595 | ||||||
Employee benefits | 657 | 134 | ||||||
Capital loss carryforwards | 273 | 158 | ||||||
Tax credit carryforwards | 348 | 20 | ||||||
Net unrealized investment losses | 6,590 | — | ||||||
Litigation-related and government mandated | 284 | 113 | ||||||
Other | 242 | 395 | ||||||
14,688 | 5,507 | |||||||
Less: Valuation allowance | 272 | 127 | ||||||
14,416 | 5,380 | |||||||
Deferred income tax liabilities: | ||||||||
Investments, including derivatives | 5,299 | 2,135 | ||||||
Intangibles | 156 | 32 | ||||||
DAC | 3,939 | 4,177 | ||||||
Net unrealized investment gains | — | 423 | ||||||
Other | 95 | 115 | ||||||
9,489 | 6,882 | |||||||
Net deferred income tax asset/(liability) | $ | 4,927 | $ | (1,502 | ) | |||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Balance as of beginning of the period | $ | 840 | $ | 932 | ||||
Additions for tax positions of prior years | 11 | 73 | ||||||
Reductions for tax positions of prior years | (51 | ) | (53 | ) | ||||
Additions for tax positions of current year | 147 | 77 | ||||||
Reductions for tax positions of current year | (22 | ) | (8 | ) | ||||
Settlements with tax authorities | (153 | ) | (177 | ) | ||||
Lapses of statutes of limitations | (6 | ) | (4 | ) | ||||
Balance as of end of the period | $ | 766 | $ | 840 | ||||
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions, except number of claims) | ||||||||||||
Asbestos personal injury claims at year end | 74,027 | 79,717 | 87,070 | |||||||||
Number of new claims during the year | 5,063 | 7,161 | 7,870 | |||||||||
Settlement payments during the year (1) | $ | 99.0 | $ | 28.2 | $ | 35.5 |
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(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, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Other Assets: | ||||||||
Premium tax offset for future undiscounted assessments | $ | 50 | $ | 40 | ||||
Premium tax offsets currently available for paid assessments | 7 | 6 | ||||||
Receivable for reimbursement of paid assessments (1) | 7 | 7 | ||||||
$ | 64 | $ | 53 | |||||
Other Liabilities: | ||||||||
Insolvency assessments | $ | 83 | $ | 74 | ||||
(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) | ||||||||||||
2009 | $ | 431 | $ | 15 | $ | 278 | ||||||
2010 | $ | 391 | $ | 11 | $ | 247 | ||||||
2011 | $ | 314 | $ | 11 | $ | 213 | ||||||
2012 | $ | 246 | $ | 11 | $ | 171 | ||||||
2013 | $ | 206 | $ | 11 | $ | 152 | ||||||
Thereafter | $ | 724 | $ | 34 | $ | 1,080 |
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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 | $ | 1,938 | $ | — | $ | (992 | ) | $ | 946 | |||||||
Other assets: Intangible asset | $ | 12 | (12 | ) | — | $ | — | |||||||||
Other liabilities: Accrued pension benefit cost | $ | (497 | ) | (14 | ) | (66 | ) | $ | (577 | ) | ||||||
Other liabilities: Accrued other postretirement benefit plan cost | $ | (794 | ) | — | (95 | ) | $ | (889 | ) | |||||||
Subtotal | (26 | ) | (1,153 | ) | ||||||||||||
Net liability of subsidiary held-for-sale | — | (18 | ) | |||||||||||||
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 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | $ | 5,722 | $ | 5,909 | $ | 1,599 | $ | 2,061 | ||||||||
Service cost | 164 | 162 | 21 | 27 | ||||||||||||
Interest cost | 379 | 351 | 103 | 103 | ||||||||||||
Plan participants’ contributions | — | — | 31 | 31 | ||||||||||||
Net actuarial (gains) losses | 129 | (387 | ) | 16 | (463 | ) | ||||||||||
Change in benefits | (1 | ) | 39 | 1 | — | |||||||||||
Prescription drug subsidy | — | — | 10 | 13 | ||||||||||||
Benefits paid | (352 | ) | (352 | ) | (149 | ) | (173 | ) | ||||||||
Benefit obligation at end of year | 6,041 | 5,722 | 1,632 | 1,599 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | 6,520 | 6,278 | 1,183 | 1,172 | ||||||||||||
Actual return on plan assets | (952 | ) | 546 | (150 | ) | 58 | ||||||||||
Employer contribution | 343 | 48 | 2 | 1 | ||||||||||||
Benefits paid | (352 | ) | (352 | ) | (24 | ) | (48 | ) | ||||||||
Fair value of plan assets at end of year | 5,559 | 6,520 | 1,011 | 1,183 | ||||||||||||
Funded status at end of year | $ | (482 | ) | $ | 798 | $ | (621 | ) | $ | (416 | ) | |||||
Amounts recognized in the consolidated balance sheet consist of: | ||||||||||||||||
Other assets | $ | 227 | $ | 1,396 | $ | — | $ | — | ||||||||
Other liabilities | (709 | ) | (598 | ) | (621 | ) | (416 | ) | ||||||||
Net amount recognized | $ | (482 | ) | $ | 798 | $ | (621 | ) | $ | (416 | ) | |||||
Accumulated other comprehensive (income) loss: | ||||||||||||||||
Net actuarial (gains) losses | $ | 2,184 | $ | 623 | $ | 147 | $ | (112 | ) | |||||||
Prior service cost (credit) | 45 | 64 | (157 | ) | (193 | ) | ||||||||||
2,229 | 687 | (10 | ) | (305 | ) | |||||||||||
Deferred income tax and minority interest | (780 | ) | (251 | ) | 4 | 109 | ||||||||||
$ | 1,449 | $ | 436 | $ | (6 | ) | $ | (196 | ) | |||||||
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December 31, | ||||||||||||||||||||||||
Qualified Plan | Non-Qualified Plan | Total | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aggregate fair value of plan assets (principally Company contracts) | $ | 5,559 | $ | 6,520 | $ | — | $ | — | $ | 5,559 | $ | 6,520 | ||||||||||||
Aggregate projected benefit obligation | 5,356 | 5,139 | 685 | 583 | 6,041 | 5,722 | ||||||||||||||||||
Over (under) funded | $ | 203 | $ | 1,381 | $ | (685 | ) | $ | (583 | ) | $ | (482 | ) | $ | 798 | |||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Projected benefit obligation | $ | 708 | $ | 597 | ||||
Accumulated benefit obligation | $ | 590 | $ | 517 | ||||
Fair value of plan assets | $ | — | $ | — |
December 31, | ||||||||||||||||
Other | ||||||||||||||||
Pension | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Projected benefit obligation | $ | 712 | $ | 602 | $ | 1,632 | $ | 1,599 | ||||||||
Fair value of plan assets | $ | 4 | $ | 4 | $ | 1,011 | $ | 1,183 |
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Years Ended December 31, | ||||||||||||||||||||||||
Pension | Other Postretirement | |||||||||||||||||||||||
Benefits | Benefits | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net Periodic Benefit Cost | ||||||||||||||||||||||||
Service cost | $ | 164 | $ | 162 | $ | 159 | $ | 21 | $ | 27 | $ | 35 | ||||||||||||
Interest cost | 379 | 351 | 332 | 103 | 103 | 116 | ||||||||||||||||||
Expected return on plan assets | (517 | ) | (505 | ) | (452 | ) | (86 | ) | (86 | ) | (79 | ) | ||||||||||||
Amortization of net actuarial (gains) losses | 24 | 68 | 128 | (1 | ) | — | 22 | |||||||||||||||||
Amortization of prior service cost (credit) | 15 | 17 | 8 | (37 | ) | (36 | ) | (36 | ) | |||||||||||||||
Net periodic benefit cost | 65 | 93 | $ | 175 | — | 8 | $ | 58 | ||||||||||||||||
Net periodic benefit cost of subsidiary held-for-sale | 1 | 5 | — | 1 | ||||||||||||||||||||
66 | 98 | — | 9 | |||||||||||||||||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) | ||||||||||||||||||||||||
Net actuarial (gains) losses | 1,561 | (432 | ) | 259 | (440 | ) | ||||||||||||||||||
Prior service cost (credit) | (19 | ) | 40 | 36 | — | |||||||||||||||||||
Amortization of net actuarial (gains) losses | (24 | ) | (68 | ) | 1 | — | ||||||||||||||||||
Amortization of prior service cost (credit) | (15 | ) | (17 | ) | 37 | 36 | ||||||||||||||||||
Total recognized in other comprehensive income (loss) | 1,503 | (477 | ) | 333 | (404 | ) | ||||||||||||||||||
Total recognized in net periodic benefit cost and other comprehensive income (loss) | $ | 1,569 | $ | (379 | ) | $ | 333 | $ | (395 | ) | ||||||||||||||
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December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Cumulative reduction in benefit obligation: | ||||||||||||
Balance, beginning of year | $ | 299 | $ | 328 | $ | 298 | ||||||
Service cost | 5 | 7 | 6 | |||||||||
Interest cost | 20 | 19 | 19 | |||||||||
Net actuarial gains (losses) | 3 | (42 | ) | 15 | ||||||||
Prescription drug subsidy | (10 | ) | (13 | ) | (10 | ) | ||||||
Balance, end of year | $ | 317 | $ | 299 | $ | 328 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Reduction in net periodic benefit cost: | ||||||||||||
Service cost | $ | 5 | $ | 7 | $ | 6 | ||||||
Interest cost | 20 | 19 | 19 | |||||||||
Amortization of net actuarial gains (losses) | — | 5 | 30 | |||||||||
Total reduction in net periodic benefit cost | $ | 25 | $ | 31 | $ | 55 | ||||||
December 31, | ||||||||
Pension | Other Postretirement | |||||||
Benefits | Benefits | |||||||
2008 | 2007 | 2008 | 2007 | |||||
Weighted average discount rate | 6.60% | 6.65% | 6.62% | 6.65% | ||||
Rate of compensation increase | 3.5%-7.5% | 3.5%-8% | N/A | N/A |
December 31, | ||||||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||
Weighted average discount rate | 6.65% | 6.00% | 5.82% | 6.65% | 6.00% | 5.82% | ||||||
Weighted average expected rate of return on plan assets | 8.25% | 8.25% | 8.25% | 7.33% | 7.47% | 7.42% | ||||||
Rate of compensation increase | 3.5%-8% | 3.5%-8% | 3%-8% | N/A | N/A | N/A |
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December 31, | ||||
2008 | 2007 | |||
Pre-Medicare eligible claims | 8.8% down to 5.8% in 2018 and gradually decreasing until 2079 reaching the ultimate rate of 4.1% | 8.5% down to 5% in 2014 and remaining constant thereafter | ||
Medicare eligible claims | 8.8% down to 5.8% in 2018 and gradually decreasing until 2079 reaching the ultimate rate of 4.1% | 10.5% down to 5% in 2018 and remaining constant thereafter |
One Percent | One Percent | |||||||
Increase | Decrease | |||||||
(In millions) | ||||||||
Effect on total of service and interest cost components | $ | 6 | $ | (6 | ) | |||
Effect of accumulated postretirement benefit obligation | $ | 76 | $ | (86 | ) |
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December 31, | ||||||||||||||||
Other | ||||||||||||||||
Pension | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Asset Category | ||||||||||||||||
Equity securities | 28 | % | 38 | % | 27 | % | 37 | % | ||||||||
Fixed maturity securities | 51 | 44 | 71 | 58 | ||||||||||||
Other (Real Estate and Alternative Investments) | 21 | 18 | 2 | 5 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Pension | Other | |||
Asset Category | ||||
Equity securities | 25%-45% | 30%-45% | ||
Fixed maturity securities | 35%-55% | 55%-85% | ||
Other (Real Estate and Alternative Investments) | 5%-32% | 0%-10% |
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Other Postretirement Benefits | ||||||||||||||||
Prescription | ||||||||||||||||
Pension | Drug | |||||||||||||||
Benefits | Gross | Subsidies | Net | |||||||||||||
(In millions) | ||||||||||||||||
2009 | $ | 384 | $ | 135 | $ | (15 | ) | $ | 120 | |||||||
2010 | $ | 398 | $ | 140 | $ | (16 | ) | $ | 124 | |||||||
2011 | $ | 408 | $ | 146 | $ | (16 | ) | $ | 130 | |||||||
2012 | $ | 424 | $ | 150 | $ | (17 | ) | $ | 133 | |||||||
2013 | $ | 437 | $ | 154 | $ | (18 | ) | $ | 136 | |||||||
2014-2018 | $ | 2,416 | $ | 847 | $ | (107 | ) | $ | 740 |
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 17, 2008 | November 30, 2008 | December 15, 2008 | $ | 0.2527777 | $ | 7 | $ | 0.4062500 | $ | 24 | ||||||||||
August 15, 2008 | August 31, 2008 | September 15, 2008 | $ | 0.2555555 | $ | 6 | $ | 0.4062500 | $ | 24 | ||||||||||
May 15, 2008 | May 31, 2008 | June 16, 2008 | $ | 0.2555555 | $ | 7 | $ | 0.4062500 | $ | 24 | ||||||||||
March 5, 2008 | February 29, 2008 | March 17, 2008 | $ | 0.3785745 | $ | 9 | $ | 0.4062500 | $ | 24 | ||||||||||
$ | 29 | $ | 96 | |||||||||||||||||
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 | |||||||||||||||||
Repurchases |
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Issuances |
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Dividends |
Dividend | ||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||
(In millions, | ||||||||||||
except per share data) | ||||||||||||
October 28, 2008 | November 10, 2008 | December 15, 2008 | $ | 0.74 | $ | 592 | ||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 | ||||||
October 24, 2006 | November 6, 2006 | December 15, 2006 | $ | 0.59 | $ | 450 |
Overview |
Description of Plans |
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Stock Options |
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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, 2008 | 24,430,547 | $ | 38.83 | 6.17 | $ | 557 | ||||||||||
Granted | 3,464,075 | $ | 59.48 | |||||||||||||
Exercised | (1,374,872 | ) | $ | 32.76 | ||||||||||||
Cancelled/Expired | (142,145 | ) | $ | 44.62 | ||||||||||||
Forfeited | (219,330 | ) | $ | 51.44 | ||||||||||||
Outstanding at December 31, 2008 | 26,158,275 | $ | 41.73 | 5.73 | $ | — | ||||||||||
Aggregate number of stock options expected to vest at December 31, 2008 | 25,568,808 | $ | 41.35 | 5.66 | $ | — | ||||||||||
Exercisable at December 31, 2008 | 19,471,449 | $ | 35.83 | 4.79 | $ | — | ||||||||||
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Years Ended December 31, | ||||||
2008 | 2007 | 2006 | ||||
Dividend yield | 1.21% | 0.94% | 1.04% | |||
Risk-free rate of return | 1.91%-7.21% | 4.30%-5.32% | 4.17%-4.96% | |||
Expected volatility | 24.85% | 19.54% | 22.00% | |||
Exercise multiple | 1.73 | 1.66 | 1.52 | |||
Post-vesting termination rate | 3.05% | 3.66% | 4.09% | |||
Contractual term (years) | 10 | 10 | 10 | |||
Expected life (years) | 6 | 6 | 6 | |||
Weighted average exercise price of stock options granted | $59.48 | $62.86 | $50.21 | |||
Weighted average fair value of stock options granted | $17.51 | $17.76 | $13.84 |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Total intrinsic value of stock options exercised | $ | 36 | $ | 122 | $ | 65 | ||||||
Cash received from exercise of stock options | $ | 45 | $ | 110 | $ | 83 | ||||||
Tax benefit realized from stock options exercised | $ | 13 | $ | 43 | $ | 23 |
Performance Shares |
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Weighted Average | ||||||||
Grant Date | ||||||||
Performance Shares | Fair Value | |||||||
Outstanding at January 1, 2008 | 2,690,125 | $ | 48.39 | |||||
Granted | 954,075 | $ | 57.17 | |||||
Forfeited | (89,125 | ) | $ | 57.43 | ||||
Paid | (968,425 | ) | $ | 36.87 | ||||
Outstanding at December 31, 2008 | 2,586,650 | $ | 55.63 | |||||
Performance Shares expected to vest at December 31, 2008 | 2,535,784 | $ | 55.56 | |||||
Long-Term Performance Compensation Plan |
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2009 | 2008 | 2007 | ||||||||||||||||||
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 | $ | 552 | $ | 1,318 | (4) | $ | 1,299 | $ | 500 | $ | 919 | |||||||||
MetLife Insurance Company of Connecticut | $ | 714 | $ | 500 | $ | 1,026 | $ | 690 | (6) | $ | 690 | |||||||||
Metropolitan Tower Life Insurance Company | $ | 88 | $ | 277 | (5) | $ | 113 | $ | — | $ | 104 | |||||||||
Metropolitan Property and Casualty Insurance Company | $ | 9 | $ | 300 | $ | — | $ | 400 | $ | 16 |
(1) | Reflects dividend amounts that may be paid during 2009 without prior regulatory approval. However, if paid before a specified date during 2009, some or all of such dividends may require regulatory approval. | |
(2) | All 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) | As described in Note 2, consists of shares of RGA stock distributed by MLIC to the Holding Company as an in-kind dividend of $1,318 million. | |
(5) | Includes shares of an affiliate distributed to the Holding Company as an in-kind dividend in the amount of $164 million. | |
(6) | 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, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Holding gains (losses) on investments arising during the year | $ | (26,491 | ) | $ | (1,485 | ) | $ | (1,022 | ) | |||
Income tax effect of holding gains (losses) | 8,989 | 581 | 379 | |||||||||
Reclassification adjustments: | ||||||||||||
Recognized holding (gains) losses included in current year income | 2,040 | 176 | 916 | |||||||||
Amortization of premiums and accretion of discounts associated with investments | (926 | ) | (831 | ) | (600 | ) | ||||||
Income tax effect | (377 | ) | 254 | (117 | ) | |||||||
Allocation of holding losses on investments relating to other policyholder amounts | 4,809 | 676 | 581 | |||||||||
Income tax effect of allocation of holding losses to other policyholder amounts | (1,621 | ) | (264 | ) | (215 | ) | ||||||
Unrealized investment loss of subsidiary at date of sale | 112 | — | — | |||||||||
Deferred income tax on unrealized investment loss of subsidiary at date of sale | (60 | ) | — | — | ||||||||
Net unrealized investment gains (losses), net of income tax | (13,525 | ) | (893 | ) | (78 | ) | ||||||
Foreign currency translation adjustment | (593 | ) | 290 | 46 | ||||||||
Minimum pension liability adjustment, net of income tax | — | — | (18 | ) | ||||||||
Defined benefit plan adjustment, net of income tax | (1,203 | ) | 563 | — | ||||||||
Other comprehensive income (loss) | $ | (15,321 | ) | $ | (40 | ) | $ | (50 | ) | |||
19. | Other Expenses |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Compensation | $ | 3,549 | $ | 3,548 | $ | 3,422 | ||||||
Commissions | 3,384 | 3,207 | 2,866 | |||||||||
Interest and debt issue costs | 1,086 | 987 | 812 | |||||||||
Amortization of DAC and VOBA | 3,489 | 2,250 | 1,904 | |||||||||
Capitalization of DAC | (3,092 | ) | (3,064 | ) | (2,825 | ) | ||||||
Rent, net of sublease income | 477 | 373 | 345 | |||||||||
Minority interest | (23 | ) | 23 | 23 | ||||||||
Insurance tax | 497 | 503 | 488 | |||||||||
Other | 2,557 | 2,602 | 2,502 | |||||||||
Total other expenses | $ | 11,924 | $ | 10,429 | $ | 9,537 | ||||||
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Amortization and Capitalization of DAC and VOBA |
Interest and Debt Issue Costs |
Lease Impairments |
Restructuring Charges |
Year Ended | ||||
December 31, 2008 | ||||
(In millions) | ||||
Balance as of beginning of the period | $ | — | ||
Severance charges | 109 | |||
Change in severance charge estimates | (8 | ) | ||
Cash payments | (15 | ) | ||
Balance as of end of the period | $ | 86 | ||
Total restructuring charges incurred | $ | 101 | ||
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20. | Earnings Per Common Share |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions, except share and per share data) | ||||||||||||
Weighted average common stock outstanding for basic earnings per common share | 735,184,337 | 744,153,514 | 761,105,024 | |||||||||
Incremental common shares from assumed: | ||||||||||||
Stock purchase contracts underlying common equity units (1) | 2,043,553 | 7,138,900 | 1,416,134 | |||||||||
Exercise or issuance of stock-based awards | 7,557,540 | 10,971,585 | 8,182,938 | |||||||||
Weighted average common stock outstanding for diluted earnings per common share | 744,785,430 | 762,263,999 | 770,704,096 | |||||||||
Earnings per common share: | ||||||||||||
Income from continuing operations | $ | 3,510 | $ | 4,102 | $ | 2,910 | ||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Income from continuing operations available to common shareholders | $ | 3,385 | $ | 3,965 | $ | 2,776 | ||||||
Basic | $ | 4.60 | $ | 5.33 | $ | 3.65 | ||||||
Diluted | $ | 4.54 | $ | 5.20 | $ | 3.60 | ||||||
Income (loss) from discontinued operations, net of income tax | $ | (301 | ) | $ | 215 | $ | 3,383 | |||||
Basic | $ | (0.41 | ) | $ | 0.29 | $ | 4.44 | |||||
Diluted | $ | (0.40 | ) | $ | 0.28 | $ | 4.39 | |||||
Net income | $ | 3,209 | $ | 4,317 | $ | 6,293 | ||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | ||||||
Basic | $ | 4.19 | $ | 5.62 | $ | 8.09 | ||||||
Diluted | $ | 4.14 | $ | 5.48 | $ | 7.99 | ||||||
(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) | ||||||||||||||||
2008 (1) | ||||||||||||||||
Total revenues | $ | 11,626 | $ | 12,048 | $ | 13,353 | $ | 13,962 | ||||||||
Total expenses | $ | 10,788 | $ | 10,824 | $ | 11,763 | $ | 12,524 | ||||||||
Income from continuing operations | $ | 628 | $ | 883 | $ | 1,058 | $ | 941 | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | 20 | $ | 63 | $ | (428 | ) | $ | 44 | |||||||
Net income | $ | 648 | $ | 946 | $ | 630 | $ | 985 | ||||||||
Net income available to common shareholders | $ | 615 | $ | 915 | $ | 600 | $ | 954 | ||||||||
Basic earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 0.82 | $ | 1.19 | $ | 1.44 | $ | 1.15 | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | 0.03 | $ | 0.09 | $ | (0.60 | ) | $ | 0.06 | �� | ||||||
Net income | $ | 0.90 | $ | 1.33 | $ | 0.88 | $ | 1.25 | ||||||||
Net income available to common shareholders | $ | 0.85 | $ | 1.28 | $ | 0.84 | $ | 1.21 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 0.81 | $ | 1.17 | $ | 1.42 | $ | 1.14 | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | 0.03 | $ | 0.09 | $ | (0.59 | ) | $ | 0.06 | |||||||
Net income | $ | 0.88 | $ | 1.30 | $ | 0.88 | $ | 1.25 | ||||||||
Net income available to common shareholders | $ | 0.84 | $ | 1.26 | $ | 0.83 | $ | 1.20 | ||||||||
2007 | ||||||||||||||||
Total revenues | $ | 11,505 | $ | 11,699 | $ | 11,646 | $ | 12,308 | ||||||||
Total expenses | $ | 10,149 | $ | 10,141 | $ | 10,328 | $ | 10,778 | ||||||||
Income from continuing operations | $ | 970 | $ | 1,109 | $ | 940 | $ | 1,083 | ||||||||
Income from discontinued operations, net of income tax | $ | 47 | $ | 54 | $ | 79 | $ | 35 | ||||||||
Net income | $ | 1,017 | $ | 1,163 | $ | 1,019 | $ | 1,118 | ||||||||
Net income available to common shareholders | $ | 983 | $ | 1,129 | $ | 985 | $ | 1,083 | ||||||||
Basic earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 1.24 | $ | 1.44 | $ | 1.22 | $ | 1.42 | ||||||||
Income from discontinued operations, net of income tax | $ | 0.07 | $ | 0.08 | $ | 0.10 | $ | 0.05 | ||||||||
Net income | $ | 1.35 | $ | 1.56 | $ | 1.37 | $ | 1.52 | ||||||||
Net income available to common shareholders | $ | 1.31 | $ | 1.52 | $ | 1.32 | $ | 1.47 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 1.22 | $ | 1.41 | $ | 1.19 | $ | 1.39 | ||||||||
Income from discontinued operations, net of income tax | $ | 0.06 | $ | 0.07 | $ | 0.10 | $ | 0.05 | ||||||||
Net income | $ | 1.32 | $ | 1.52 | $ | 1.34 | $ | 1.48 | ||||||||
Net income available to common shareholders | $ | 1.28 | $ | 1.48 | $ | 1.29 | $ | 1.44 |
(1) | During the fourth quarter of 2008, the Company recorded a cumulative out-of-period adjustment in connection with the exclusion of certain derivative gains from the estimation of cumulative gross profits used in the determination of DAC amortization. The adjustment decreased deferred policy acquisition costs and increased DAC amortization by $124 million and decreased net income by $80 million in the fourth quarter of 2008. Had the amounts been reflected during the first, second and third quarters of 2008 — in the periods in which they arose — DAC amortization would have increased (decreased) by $100 million, ($61) million, and $85 million, respectively, resulting in an increase (decrease) of net income by ($65) million, $40 million and ($55) million, respectively. Net income available to common shareholders per diluted common share would have been higher (lower) by ($0.09), $0.06, ($0.08) and $0.10 during the first, second, third and fourth quarters, respectively, of 2008 had the amounts been reflected in the periods in which they arose. Based upon an evaluation of all relevant quantitative and qualitative factors, and after considering the provisions of APB Opinion No. 28,Interim Financial Reporting, paragraph 29, SAB No. 99,Materiality, and SAB 108, management believes this correcting adjustment was not material to the Company’s full year results for 2008 or the trend of earnings. |
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22. | Business Segment Information |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||
December 31, 2008 | Institutional | Individual | International | Home | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 14,964 | $ | 4,481 | $ | 3,470 | $ | 2,971 | $ | 28 | $ | 25,914 | ||||||||||||
Universal life and investment-type product policy fees | 886 | 3,400 | 1,095 | — | — | 5,381 | ||||||||||||||||||
Net investment income | 7,535 | 6,509 | 1,249 | 186 | 817 | 16,296 | ||||||||||||||||||
Other revenues | 775 | 571 | 18 | 38 | 184 | 1,586 | ||||||||||||||||||
Net investment gains (losses) | 168 | 665 | 167 | (135 | ) | 947 | 1,812 | |||||||||||||||||
Total revenues | 24,328 | 15,626 | 5,999 | 3,060 | 1,976 | 50,989 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 16,525 | 5,779 | 3,166 | 1,919 | 48 | 27,437 | ||||||||||||||||||
Interest credited to policyholder account balances | 2,581 | 2,028 | 171 | — | 7 | 4,787 | ||||||||||||||||||
Policyholder dividends | — | 1,739 | 7 | 5 | — | 1,751 | ||||||||||||||||||
Other expenses | 2,408 | 5,143 | 1,671 | 804 | 1,898 | 11,924 | ||||||||||||||||||
Total expenses | 21,514 | 14,689 | 5,015 | 2,728 | 1,953 | 45,899 | ||||||||||||||||||
Income from continuing operations before provision for income tax | 2,814 | 937 | 984 | 332 | 23 | 5,090 | ||||||||||||||||||
Provision for income tax | 955 | 307 | 404 | 57 | (143 | ) | 1,580 | |||||||||||||||||
Income from continuing operations | 1,859 | 630 | 580 | 275 | 166 | 3,510 | ||||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 3 | (11 | ) | — | — | (293 | ) | (301 | ) | |||||||||||||||
Net income | 1,862 | 619 | 580 | 275 | (127 | ) | 3,209 | |||||||||||||||||
Preferred stock dividends | — | — | — | — | 125 | 125 | ||||||||||||||||||
Net income available to common shareholders | $ | 1,862 | $ | 619 | $ | 580 | $ | 275 | $ | (252 | ) | $ | 3,084 | |||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Total assets | $ | 195,191 | $ | 214,476 | $ | 25,891 | $ | 5,232 | $ | 60,888 | $ | 501,678 | ||||||||||||
DAC and VOBA | $ | 1,013 | $ | 16,505 | $ | 2,436 | $ | 183 | $ | 7 | $ | 20,144 | ||||||||||||
Goodwill | $ | 1,051 | $ | 2,957 | $ | 373 | $ | 157 | $ | 470 | $ | 5,008 | ||||||||||||
Separate account assets | $ | 46,912 | $ | 69,456 | $ | 4,471 | $ | — | $ | — | $ | 120,839 | ||||||||||||
Policyholder liabilities | $ | 133,816 | $ | 123,610 | $ | 16,122 | $ | 3,126 | $ | 12,471 | $ | 289,145 | ||||||||||||
Separate account liabilities | $ | 46,912 | $ | 69,456 | $ | 4,471 | $ | — | $ | — | $ | 120,839 |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||
December 31, 2007 | Institutional | Individual | International | Home | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 12,392 | $ | 4,481 | $ | 3,096 | $ | 2,966 | $ | 35 | $ | 22,970 | ||||||||||||
Universal life and investment-type product policy fees | 802 | 3,441 | 995 | — | — | 5,238 | ||||||||||||||||||
Net investment income | 8,176 | 7,025 | 1,247 | 196 | 1,419 | 18,063 | ||||||||||||||||||
Other revenues | 726 | 600 | 24 | 43 | 72 | 1,465 | ||||||||||||||||||
Net investment gains (losses) | (582 | ) | (112 | ) | 56 | 15 | 45 | (578 | ) | |||||||||||||||
Total revenues | 21,514 | 15,435 | 5,418 | 3,220 | 1,571 | 47,158 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 13,805 | 5,665 | 2,460 | 1,807 | 46 | 23,783 | ||||||||||||||||||
Interest credited to policyholder account balances | 3,094 | 2,013 | 354 | — | — | 5,461 | ||||||||||||||||||
Policyholder dividends | — | 1,715 | 4 | 4 | — | 1,723 | ||||||||||||||||||
Other expenses | 2,439 | 4,003 | 1,749 | 829 | 1,409 | 10,429 | ||||||||||||||||||
Total expenses | 19,338 | 13,396 | 4,567 | 2,640 | 1,455 | 41,396 | ||||||||||||||||||
Income from continuing operations before provision for income tax | 2,176 | 2,039 | 851 | 580 | 116 | 5,762 | ||||||||||||||||||
Provision for income tax | 740 | 698 | 207 | 144 | (129 | ) | 1,660 | |||||||||||||||||
Income from continuing operations | 1,436 | 1,341 | 644 | 436 | 245 | 4,102 | ||||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 13 | 16 | (9 | ) | — | 195 | 215 | |||||||||||||||||
Net income | 1,449 | 1,357 | 635 | 436 | 440 | 4,317 | ||||||||||||||||||
Preferred stock dividends | — | — | — | — | 137 | 137 | ||||||||||||||||||
Net income available to common shareholders | $ | 1,449 | $ | 1,357 | $ | 635 | $ | 436 | $ | 303 | $ | 4,180 | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Total assets | $ | 204,005 | $ | 250,691 | $ | 26,357 | $ | 5,672 | $ | 72,424 | $ | 559,149 | ||||||||||||
DAC and VOBA | $ | 923 | $ | 14,038 | $ | 2,648 | $ | 193 | $ | 8 | $ | 17,810 | ||||||||||||
Goodwill | $ | 978 | $ | 2,957 | $ | 313 | $ | 157 | $ | 409 | $ | 4,814 | ||||||||||||
Separate account assets | $ | 52,046 | $ | 102,918 | $ | 5,195 | $ | — | $ | (17 | ) | $ | 160,142 | |||||||||||
Policyholder liabilities | $ | 121,147 | $ | 115,901 | $ | 16,082 | $ | 3,324 | $ | 9,522 | $ | 265,976 | ||||||||||||
Separate account liabilities | $ | 52,046 | $ | 102,918 | $ | 5,195 | $ | — | $ | (17 | ) | $ | 160,142 |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||
December 31, 2006 | Institutional | Individual | International | Home | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 11,867 | $ | 4,502 | $ | 2,722 | $ | 2,924 | $ | 37 | $ | 22,052 | ||||||||||||
Universal life and investment-type product policy fees | 775 | 3,131 | 805 | — | — | 4,711 | ||||||||||||||||||
Net investment income | 7,260 | 6,863 | 949 | 177 | 998 | 16,247 | ||||||||||||||||||
Other revenues | 684 | 524 | 28 | 22 | 43 | 1,301 | ||||||||||||||||||
Net investment gains (losses) | (630 | ) | (591 | ) | (10 | ) | 3 | (154 | ) | (1,382 | ) | |||||||||||||
Total revenues | 19,956 | 14,429 | 4,494 | 3,126 | 924 | 42,929 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 13,368 | 5,335 | 2,411 | 1,717 | 38 | 22,869 | ||||||||||||||||||
Interest credited to policyholder account balances | 2,593 | 2,018 | 288 | — | — | 4,899 | ||||||||||||||||||
Policyholder dividends | — | 1,696 | (3 | ) | 5 | — | 1,698 | |||||||||||||||||
Other expenses | 2,313 | 3,485 | 1,531 | 846 | 1,362 | 9,537 | ||||||||||||||||||
Total expenses | 18,274 | 12,534 | 4,227 | 2,568 | 1,400 | 39,003 | ||||||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 1,682 | 1,895 | 267 | 558 | (476 | ) | 3,926 | |||||||||||||||||
Provision (benefit) for income tax | 563 | 653 | 95 | 142 | (437 | ) | 1,016 | |||||||||||||||||
Income (loss) from continuing operations | 1,119 | 1,242 | 172 | 416 | (39 | ) | 2,910 | |||||||||||||||||
Income from discontinued operations, net of income tax | 48 | 22 | 28 | — | 3,285 | 3,383 | ||||||||||||||||||
Net income | 1,167 | 1,264 | 200 | 416 | 3,246 | 6,293 | ||||||||||||||||||
Preferred stock dividends | — | — | — | — | 134 | 134 | ||||||||||||||||||
Net income available to common shareholders | $ | 1,167 | $ | 1,264 | $ | 200 | $ | 416 | $ | 3,112 | $ | 6,159 | ||||||||||||
23. | Discontinued Operations |
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Investment income | $ | 6 | $ | 21 | $ | 243 | ||||||
Investment expense | (3 | ) | (9 | ) | (151 | ) | ||||||
Net investment gains (losses) | 8 | 13 | 4,795 | |||||||||
Total revenues | 11 | 25 | 4,887 | |||||||||
Provision for income tax | 4 | 11 | 1,725 | |||||||||
Income from discontinued operations, net of income tax | $ | 7 | $ | 14 | $ | 3,162 | ||||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Net investment income | ||||||||||||
Institutional | $ | 4 | $ | 9 | $ | 15 | ||||||
Individual | (1 | ) | 1 | 4 | ||||||||
Corporate & Other | — | 2 | 73 | |||||||||
Total net investment income | $ | 3 | $ | 12 | $ | 92 | ||||||
Net investment gains (losses) | ||||||||||||
Institutional | $ | 2 | $ | 12 | $ | 58 | ||||||
Individual | 6 | — | 23 | |||||||||
Corporate & Other | — | 1 | 4,714 | |||||||||
Total net investment gains (losses) | $ | 8 | $ | 13 | $ | 4,795 | ||||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Premiums | $ | 3,535 | $ | 4,910 | $ | 4,348 | ||||||
Net investment income | 597 | 908 | 781 | |||||||||
Other revenues | 69 | 77 | 66 | |||||||||
Net investment gains (losses) | (249 | ) | (177 | ) | 7 | |||||||
Total revenues | 3,952 | 5,718 | 5,202 | |||||||||
Policyholder benefits and claims | 2,989 | 3,989 | 3,490 | |||||||||
Interest credited to policyholder account balances | 108 | 262 | 254 | |||||||||
Other expenses | 699 | 1,226 | 1,227 | |||||||||
Total expenses | 3,796 | 5,477 | 4,971 | |||||||||
Income before provision for income tax | 156 | 241 | 231 | |||||||||
Provision for income tax | 53 | 84 | 81 | |||||||||
Income from discontinued operations, net of income tax | 103 | 157 | 150 | |||||||||
Loss on disposal, net of income tax | (458 | ) | — | — | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | (355 | ) | $ | 157 | $ | 150 | |||||
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December 31, 2007 | ||||
(In millions) | ||||
Fixed maturity securities | $ | 9,398 | ||
Equity securities | 137 | |||
Mortgage and consumer loans | 832 | |||
Policy loans | 1,059 | |||
Short-term investments | 75 | |||
Other invested assets | 4,897 | |||
Total investments | 16,398 | |||
Cash and cash equivalents | 404 | |||
Accrued investment income | 78 | |||
Premiums and other receivables | 1,440 | |||
Deferred policy acquisition costs and VOBA | 3,513 | |||
Goodwill | 96 | |||
Other assets | 91 | |||
Separate account assets | 17 | |||
Total assets held-for-sale | $ | 22,037 | ||
Future policy benefits | $ | 6,159 | ||
Policyholder account balances | 6,657 | |||
Other policyholder funds | 2,297 | |||
Long-term debt | 528 | |||
Collateral financing arrangements | 850 | |||
Junior subordinated debt securities | 399 | |||
Shares subject to mandatory redemption | 159 | |||
Current income tax payable | 33 | |||
Deferred income tax liability | 941 | |||
Other liabilities | 1,918 | |||
Separate account liabilities | 17 | |||
Total liabilities held-for-sale | $ | 19,958 | ||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Premiums | $ | 17 | $ | 15 | $ | 14 | ||||||
Universal life and investment-type product policy fees | 81 | 72 | 68 | |||||||||
Net investment income | 38 | 39 | 55 | |||||||||
Other revenues | — | 1 | 1 | |||||||||
Net investment gains (losses) | (2 | ) | 16 | (5 | ) | |||||||
Total revenues | 134 | 143 | 133 | |||||||||
Policyholder benefits and claims | 70 | 56 | 72 | |||||||||
Interest credited to policyholder account balances | 17 | 17 | 17 | |||||||||
Policyholder dividends | 3 | 3 | 2 | |||||||||
Other expenses | 29 | 29 | 28 | |||||||||
Total expenses | 119 | 105 | 119 | |||||||||
Income before provision for income tax | 15 | 38 | 14 | |||||||||
Provision for income tax | 4 | 13 | 3 | |||||||||
Income from discontinued operations, net of income tax | 11 | 25 | 11 | |||||||||
Gain on disposal, net of income tax | 37 | — | — | |||||||||
Income from discontinued operations, net of income tax | $ | 48 | $ | 25 | $ | 11 | ||||||
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December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Fixed maturity securities | $ | 514 | $ | 508 | ||||
Equity securities | 1 | 2 | ||||||
Mortgage and consumer loans | 41 | 44 | ||||||
Policy loans | 35 | 34 | ||||||
Real estate and real estate joint ventures held-for-investment | 2 | 2 | ||||||
Short-term investments | — | 29 | ||||||
Other invested assets | — | 1 | ||||||
Total investments | 593 | 620 | ||||||
Cash and cash equivalents | 32 | 3 | ||||||
Accrued investment income | 7 | 6 | ||||||
Premiums and other receivables | 19 | 17 | ||||||
Deferred policy acquisition costs and VOBA | 232 | 198 | ||||||
Deferred income tax asset | 61 | — | ||||||
Other assets | 2 | 2 | ||||||
Total assets held-for-sale | $ | 946 | $ | 846 | ||||
Future policy benefits | $ | 180 | $ | 158 | ||||
Policyholder account balances | 356 | 350 | ||||||
Other policyholder funds | 181 | 156 | ||||||
Policyholder dividends payable | 4 | 3 | ||||||
Current income tax payable | 1 | — | ||||||
Deferred income tax liability | — | 14 | ||||||
Other liabilities | 26 | 22 | ||||||
Total liabilities held-for-sale | $ | 748 | $ | 703 | ||||
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Years Ended | ||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Revenues | $ | 71 | $ | 132 | ||||
Expenses | 58 | 89 | ||||||
Income before provision for income tax | 13 | 43 | ||||||
Provision for income tax | 4 | 15 | ||||||
Net investment gain (loss), net of income tax | (4 | ) | — | |||||
Income from discontinued operations, net of income tax | $ | 5 | $ | 28 | ||||
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Revenues | $ | — | $ | — | $ | — | ||||||
Expenses | — | — | — | |||||||||
Income from discontinued operations before provision for income tax | — | — | — | |||||||||
Provision for income tax | — | — | — | |||||||||
Net investment gain (loss), net of income tax | (1 | ) | 14 | 32 | ||||||||
Income from discontinued operations, net of income tax | $ | (1 | ) | $ | 14 | $ | 32 | |||||
24. | Fair Value |
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Notional | Carrying | Estimated | ||||||||||
December 31, 2007 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 232,336 | $ | 232,336 | ||||||||
Equity securities | $ | 5,911 | $ | 5,911 | ||||||||
Trading securities | $ | 779 | $ | 779 | ||||||||
Mortgage and consumer loans | $ | 46,154 | $ | 46,714 | ||||||||
Policy loans | $ | 9,326 | $ | 9,326 | ||||||||
Short-term investments | $ | 2,544 | $ | 2,544 | ||||||||
Cash and cash equivalents | $ | 9,961 | $ | 9,961 | ||||||||
Accrued investment income | $ | 3,545 | $ | 3,545 | ||||||||
Assets of subsidiaries held-for-sale | $ | 12,609 | $ | 12,618 | ||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 110,371 | $ | 110,199 | ||||||||
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 | ||||||||
Liabilities of subsidiaries held-for-sale | $ | 6,963 | $ | 6,092 | ||||||||
Commitments:(1) | ||||||||||||
Mortgage loan commitments | $ | 4,030 | $ | — | $ | (43 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,196 | $ | — | $ | (59 | ) |
(1) | Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. |
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Notional | Carrying | Estimated | ||||||||||
December 31, 2008 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 188,251 | $ | 188,251 | ||||||||
Equity securities | $ | 3,197 | $ | 3,197 | ||||||||
Trading securities | $ | 946 | $ | 946 | ||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | $ | 49,352 | $ | 48,133 | ||||||||
Held-for-sale | $ | 2,012 | $ | 2,010 | ||||||||
Mortgage and consumer loans, net | $ | 51,364 | $ | 50,143 | ||||||||
Policy loans | $ | 9,802 | $ | 11,952 | ||||||||
Real estate joint ventures (1) | $ | 163 | $ | 176 | ||||||||
Other limited partnership interests (1) | $ | 1,900 | $ | 2,269 | ||||||||
Short-term investments | $ | 13,878 | $ | 13,878 | ||||||||
Other invested assets: (1) | ||||||||||||
Derivative assets | $ | 133,565 | $ | 12,306 | $ | 12,306 | ||||||
Mortgage servicing rights | $ | 191 | $ | 191 | ||||||||
Other | $ | 801 | $ | 900 | ||||||||
Cash and cash equivalents | $ | 24,207 | $ | 24,207 | ||||||||
Accrued investment income | $ | 3,061 | $ | 3,061 | ||||||||
Premiums and other receivables (1) | $ | 2,995 | $ | 3,473 | ||||||||
Other assets (1) | $ | 800 | $ | 629 | ||||||||
Assets of subsidiaries held-for-sale (1) | $ | 630 | $ | 649 | ||||||||
Separate account assets | $ | 120,839 | $ | 120,839 | ||||||||
Net embedded derivatives within asset host contracts (2) | $ | 205 | $ | 205 | ||||||||
Liabilities: | ||||||||||||
Policyholder account balances (1) | $ | 110,174 | $ | 102,902 | ||||||||
Short-term debt | $ | 2,659 | $ | 2,659 | ||||||||
Long-term debt (1) | $ | 9,619 | $ | 8,155 | ||||||||
Collateral financing arrangements | $ | 5,192 | $ | 1,880 | ||||||||
Junior subordinated debt securities | $ | 3,758 | $ | 2,606 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 31,059 | $ | 31,059 | ||||||||
Other liabilities: (1) | ||||||||||||
Derivative liabilities | $ | 64,523 | $ | 4,042 | $ | 4,042 | ||||||
Trading liabilities | $ | 57 | $ | 57 | ||||||||
Other | $ | 638 | $ | 638 | ||||||||
Liabilities of subsidiaries held-for-sale (1) | $ | 50 | $ | 49 | ||||||||
Separate account liabilities (1) | $ | 28,862 | $ | 28,862 | ||||||||
Net embedded derivatives within liability host contracts (2) | $ | 3,051 | $ | 3,051 | ||||||||
Commitments: (3) | ||||||||||||
Mortgage loan commitments | $ | 2,690 | $ | — | $ | (129 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 979 | $ | — | $ | (105 | ) |
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(1) | Carrying values presented herein differ from those presented on the consolidated balance sheet because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions omitted from the table above are not considered financial instruments. | |
(2) | Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances. Equity securities also include embedded derivatives of ($173) million. | |
(3) | Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. |
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• | Mortgage and Consumer Loans Held-for-Investment — For mortgage and consumer loans held-for-investment and carried at amortized cost, fair value is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar loans with similar credit risk. | |
• | Mortgage Loans Held-for-Sale —Mortgage loans held-for-sale principally includes residential mortgages for which the fair value option was elected and which are carried at estimated fair value. Generally, quoted market prices are not available for residential mortgage loans held-for-sale; accordingly, the estimated fair values of such assets are determined based on observable pricing of residential mortgage loans held-for-sale with similar characteristics, or observable pricing for securities backed by similar types of loans, adjusted to convert the securities prices to loan prices. When observable pricing for similar loans or securities that are backed by similar loans are not available, the estimated fair values of residential mortgage loans held-for-sale are determined using independent broker quotations, which is intended to approximate the amounts that would be received from third parties. Certain other mortgages previously classified as held-for-investment have also been designated as held-for-sale. For these loans, estimated fair value is determined using independent broker quotations or, when the loan is in foreclosure or otherwise determined to be collateral dependent, the fair value of the underlying collateral estimated using internal models. |
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December 31, 2008 | ||||||||||||||||
Fair Value Measurements at | ||||||||||||||||
Reporting Date Using | ||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||
Active Markets for | Other | Significant | ||||||||||||||
Identical Assets | Observable | Unobservable | Total | |||||||||||||
and Liabilities | Inputs | Inputs | Estimated | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 55,805 | $ | 7,498 | $ | 63,303 | ||||||||
Residential mortgage-backed securities | — | 35,433 | 595 | 36,028 | ||||||||||||
Foreign corporate securities | — | 23,735 | 5,944 | 29,679 | ||||||||||||
U.S. Treasury/agency securities | 10,132 | 11,090 | 88 | 21,310 | ||||||||||||
Commercial mortgage-backed securities | — | 12,384 | 260 | 12,644 | ||||||||||||
Asset-backed securities | — | 8,071 | 2,452 | 10,523 | ||||||||||||
Foreign government securities | 282 | 9,463 | 408 | 10,153 | ||||||||||||
State and political subdivision securities | — | 4,434 | 123 | 4,557 | ||||||||||||
Other fixed maturity securities | — | 14 | 40 | 54 | ||||||||||||
Total fixed maturity securities | 10,414 | 160,429 | 17,408 | 188,251 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stock | 413 | 1,167 | 105 | 1,685 | ||||||||||||
Non-redeemable preferred stock | — | 238 | 1,274 | 1,512 | ||||||||||||
Total equity securities | 413 | 1,405 | 1,379 | 3,197 | ||||||||||||
Trading securities | 587 | 184 | 175 | 946 | ||||||||||||
Short-term investments (1) | 10,549 | 2,913 | 100 | 13,562 | ||||||||||||
Mortgage and consumer loans (2) | — | 1,798 | 177 | 1,975 | ||||||||||||
Derivative assets (3) | 55 | 9,483 | 2,768 | 12,306 | ||||||||||||
Net embedded derivatives within asset host contracts (4) | — | — | 205 | 205 | ||||||||||||
Mortgage servicing rights (5) | — | — | 191 | 191 | ||||||||||||
Separate account assets (6) | 85,886 | 33,195 | 1,758 | 120,839 | ||||||||||||
Total assets | $ | 107,904 | $ | 209,407 | $ | 24,161 | $ | 341,472 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities (3) | $ | 273 | $ | 3,548 | $ | 221 | $ | 4,042 | ||||||||
Net embedded derivatives within liability host contracts (4) | — | (83 | ) | 3,134 | 3,051 | |||||||||||
Trading liabilities (7) | 57 | — | — | 57 | ||||||||||||
Total liabilities | $ | 330 | $ | 3,465 | $ | 3,355 | $ | 7,150 | ||||||||
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(1) | Short-term investments as presented in the table above differ from the amounts presented in the consolidated balance sheet because certain short-term investments are not measured at estimated fair value (e.g. time deposits, money market funds, etc.). | |
(2) | Mortgage and consumer loans as presented in the table above differ from the amount presented in the consolidated balance sheet as this table only includes residential mortgage loans held-for-sale measured at estimated fair value on a recurring basis. | |
(3) | Derivative assets are presented within other invested assets and derivatives liabilities are presented within other liabilities. The amounts are presented gross in the table above to reflect the presentation in the consolidated balance sheet, but are presented net for purposes of the rollforward in the following tables. | |
(4) | Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances. Equity securities also includes embedded derivatives of ($173) million. | |
(5) | Mortgage servicing rights are presented within other invested assets. | |
(6) | Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets as prescribed bySOP 03-1. | |
(7) | Trading liabilities are presented within other liabilities. |
Level 1 | This category includes certain U.S. Treasury and agency fixed maturity securities, certain foreign government fixed maturity securities; exchange-traded common stock; and certain short-term money market securities. As it relates to derivatives, this level includes financial futures including exchange-traded equity and interest rate futures, as well as financial forwards to sell residential mortgage-backed securities. Separate account assets classified within this level principally include mutual funds. Also included are assets held within separate accounts which are similar in nature to those classified in this level for the general account. | |
Level 2 | This category includes fixed maturity and equity securities priced principally by independent pricing services using observable inputs. These fixed maturity securities include most U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, state and political subdivision securities, foreign government securities, and asset-backed securities. Equity securities classified as Level 2 securities consist principally of non-redeemable preferred stock and certain equity securities where market quotes are available but are not considered actively traded. Short-term investments and trading securities included within Level 2 are of a similar nature to these fixed maturity and equity securities. Mortgage and consumer loans included in Level 2 include residential mortgage loans held-for-sale for which there is readily available observable pricing for similar loans or securities backed by similar loans and the unobservable adjustments to such prices are insignificant. As it relates to derivatives, this level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded futures and financial forwards to sell residential mortgage-backed securities included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. Separate account assets classified within this level are generally similar to those classified within this level for the general account. Hedge funds owned by separate accounts are also included within this level. Embedded derivatives classified within this level include embedded equity derivatives contained in certain guaranteed investment contracts. |
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Level 3 | This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities — including below investment grade private placements; residential mortgage-backed securities; asset-backed securities — including all of those supported by sub-prime mortgage loans; and other fixed maturity securities such as structured securities. Equity securities classified as Level 3 securities consist principally of common stock of privately held companies and non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. Short-term investments and trading securities included within Level 3 are of a similar nature to these fixed maturity and equity securities. Mortgage and consumer loans included in Level 3 include residential mortgage loans held-for-sale for which pricing for similar loans or securities backed by similar loans is not observable and the estimate of fair value is determined using unobservable broker quotes. As it relates to derivatives this category includes: financial forwards including swap spread locks with maturities which extend beyond observable periods; interest rate lock commitments with certain unobservable inputs, including pull-through rates; equity variance swaps with unobservable volatility inputs or that are priced via independent broker quotations; foreign currency swaps which are cancelable and priced through independent broker quotations; interest rate swaps with maturities which extend beyond the observable portion of the yield curve; credit default swaps based upon baskets of credits having unobservable credit correlations as well as credit default swaps with maturities which extend beyond the observable portion of the credit curves and credit default swaps priced through independent broker quotes; foreign currency forwards priced via independent broker quotations or with liquidity adjustments; equity options with unobservable volatility inputs; and interest rate caps and floors referencing unobservable yield curvesand/or which include liquidity and volatility adjustments. Separate account assets classified within this level are generally similar to those classified within this level for the general account; however, they also include mortgage loans, and other limited partnership interests. Embedded derivatives classified within this level include embedded derivatives associated with certain variable annuity riders. This category also includes mortgage servicing rights which are carried at estimated fair value and have multiple significant unobservable inputs including discount rates, estimates of loan prepayments and servicing costs. |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||||||
Impact of | Gains (Losses) included in: | Purchases, | ||||||||||||||||||||||||||||||
Balance, | SFAS 157 and | Balance, | Other | Sales, | Transfer In | Balance, | ||||||||||||||||||||||||||
December 31, | SFAS 159 | Beginning | Comprehensive | Issuances and | and/or Out | End of | ||||||||||||||||||||||||||
2007 | Adoption (1) | of Period | Earnings (2, 3) | Income (Loss) | Settlements (4) | of Level 3 (5) | Period | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Fixed maturity securities | $ | 23,326 | $ | (8 | ) | $ | 23,318 | $ | (881 | ) | $ | (6,272 | ) | $ | (596 | ) | $ | 1,839 | $ | 17,408 | ||||||||||||
Equity securities | 2,371 | — | 2,371 | (197 | ) | (478 | ) | (288 | ) | (29 | ) | 1,379 | ||||||||||||||||||||
Trading securities | 183 | 8 | 191 | (26 | ) | — | 18 | (8 | ) | 175 | ||||||||||||||||||||||
Short-term investments | 179 | — | 179 | — | — | (79 | ) | — | 100 | |||||||||||||||||||||||
Mortgage and consumer loans | — | — | — | 4 | — | 171 | 2 | 177 | ||||||||||||||||||||||||
Net derivatives (6) | 789 | (1 | ) | 788 | 1,729 | — | 29 | 1 | 2,547 | |||||||||||||||||||||||
Mortgage servicing rights (7),(8) | — | — | — | (149 | ) | — | 340 | — | 191 | |||||||||||||||||||||||
Separate account assets (9) | 1,464 | — | 1,464 | (129 | ) | — | 90 | 333 | 1,758 | |||||||||||||||||||||||
Net embedded derivatives (10) | (278 | ) | 24 | (254 | ) | (2,500 | ) | (81 | ) | (94 | ) | — | (2,929 | ) |
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(1) | Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157 associated with Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities presented in the table above was a $23 million increase to net assets. Such amount was also impacted by an increase to DAC of $17 million. The impact of adoption of SFAS 157 on RGA — not reflected in the table above as a result of the reflection of RGA in discontinued operations — was a net increase of $2 million (i.e., a decrease in Level 3 net embedded derivative liabilities of $17 million offset by a DAC decrease of $15 million) for a total impact of $42 million on Level 3 assets and liabilities. This impact of $42 million along with a $12 million reduction in the estimated fair value of Level 2 freestanding derivatives, results in a total net impact of adoption of SFAS 157 of $30 million as described in Note 1. | |
(2) | Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/losses. Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/losses. Lapses associated with embedded derivatives are included with the earnings caption of total gains/losses. | |
(3) | Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. | |
(4) | The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. For embedded derivatives, attributed fees are included within this caption along with settlements, if any. | |
(5) | Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward. | |
(6) | Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. | |
(7) | The additions and reductions (due to loan payments) affecting mortgage servicing rights were $350 million and ($10) million respectively, for the year ended December 31, 2008. | |
(8) | The changes in estimated fair value due to changes in valuation model inputs or assumptions, and other changes in estimated fair value affecting mortgage servicing rights were ($149) million and $0, respectively, for the year ended December 31, 2008. | |
(9) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. | |
(10) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. | |
(11) | Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially. |
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Total Gains and Losses | ||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Fixed maturity securities | $ | 176 | $ | (1,057 | ) | $ | — | $ | — | $ | (881 | ) | ||||||||
Equity securities | — | (197 | ) | — | — | (197 | ) | |||||||||||||
Trading securities | (26 | ) | — | — | — | (26 | ) | |||||||||||||
Short-term investments | 1 | (1 | ) | — | — | — | ||||||||||||||
Mortgage and consumer loans | — | — | 4 | — | 4 | |||||||||||||||
Net derivatives | 103 | 1,587 | 39 | — | 1,729 | |||||||||||||||
Mortgage servicing rights | — | — | (149 | ) | — | (149 | ) | |||||||||||||
Net embedded derivatives | — | (2,682 | ) | — | 182 | (2,500 | ) |
Changes in Unrealized Gains (Losses) | ||||||||||||||||||||
Relating to Assets and Liabilities Held at December 31, 2008 | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Fixed maturity securities | $ | 163 | $ | (793 | ) | $ | — | $ | — | $ | (630 | ) | ||||||||
Equity securities | — | (164 | ) | — | — | (164 | ) | |||||||||||||
Trading securities | (17 | ) | — | — | — | (17 | ) | |||||||||||||
Short-term investments | — | — | — | — | — | |||||||||||||||
Mortgage and consumer loans | — | — | 3 | — | 3 | |||||||||||||||
Net derivatives | 114 | 1,504 | 38 | — | 1,656 | |||||||||||||||
Mortgage servicing rights | — | — | (150 | ) | — | (150 | ) | |||||||||||||
Net embedded derivatives | — | (2,779 | ) | — | 182 | (2,597 | ) |
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25. | Subsequent Events |
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Other Than Investments in Related Parties
December 31, 2008
(In millions)
Amount at | ||||||||||||
Cost or | Estimated | Which Shown on | ||||||||||
Type of Investments | Amortized Cost(1) | Fair Value | Balance Sheet | |||||||||
Fixed Maturity Securities: | ||||||||||||
Bonds: | ||||||||||||
U.S. Treasury/agency securities | $ | 17,229 | $ | 21,310 | $ | 21,310 | ||||||
Foreign government securities | 9,474 | 10,153 | 10,153 | |||||||||
Public utilities | 9,906 | 9,058 | 9,058 | |||||||||
State and political subdivision securities | 5,419 | 4,557 | 4,557 | |||||||||
All other corporate bonds | 89,783 | 79,716 | 79,716 | |||||||||
Mortgage-backed and asset-backed securities | 70,320 | 59,195 | 59,195 | |||||||||
Redeemable preferred stock | 7,320 | 4,208 | 4,208 | |||||||||
Other fixed maturity securities | 57 | 54 | 54 | |||||||||
Total fixed maturity securities | 209,508 | 188,251 | 188,251 | |||||||||
Trading Securities | 1,107 | 946 | 946 | |||||||||
Equity Securities: | ||||||||||||
Non-redeemable preferred stock | 2,353 | 1,512 | 1,512 | |||||||||
Common stock: | ||||||||||||
Public utilities | 966 | 957 | 957 | |||||||||
Industrial, miscellaneous and all other | 640 | 590 | 590 | |||||||||
Banks, trust and insurance companies | 172 | 138 | 138 | |||||||||
Total equity securities | 4,131 | 3,197 | 3,197 | |||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-sale | 2,012 | 2,012 | ||||||||||
Held-for-investment | 49,352 | 49,352 | ||||||||||
Mortgage and consumer loans, net | 51,364 | 51,364 | ||||||||||
Policy loans | 9,802 | 9,802 | ||||||||||
Real estate and real estate joint ventures | 7,584 | 7,584 | ||||||||||
Real estate acquired in satisfaction of debt | 2 | 2 | ||||||||||
Other limited partnership interests | 6,039 | 6,039 | ||||||||||
Short-term investments | 13,878 | 13,878 | ||||||||||
Other invested assets | 17,248 | 17,248 | ||||||||||
Total investments | $ | 320,663 | $ | 298,311 | ||||||||
(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 from other-than-temporary declines in value and adjusted for amortization of premiums or discounts; for equity securities, cost represents original cost reduced by writedowns from other-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 for other-than-temporary impairments or original cost adjusted for equity in earnings and distributions. |
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(Parent Company Only)
December 31, 2008 and 2007
(In millions, except share and per share data)
2008 | 2007 | |||||||
Condensed Balance Sheets | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $1,504 and $2,567, respectively) | $ | 1,391 | $ | 2,540 | ||||
Equity securities available-for-sale, at estimated fair value (cost: $20 and $32, respectively) | 8 | 24 | ||||||
Short-term investments | 1,073 | — | ||||||
Other invested assets | 39 | 65 | ||||||
Total investments | 2,511 | 2,629 | ||||||
Cash and cash equivalents | 678 | 587 | ||||||
Accrued investment income | 29 | 62 | ||||||
Investment in subsidiaries | 33,203 | 45,611 | ||||||
Loans to subsidiaries | 1,200 | 1,600 | ||||||
Receivables from subsidiaries | 1 | 20 | ||||||
Other assets | 974 | 82 | ||||||
Total assets | $ | 38,596 | $ | 50,591 | ||||
Liabilities and Stockholders’ Equity Liabilities: | ||||||||
Short-term debt | $ | 300 | $ | 310 | ||||
Long-term debt — unaffiliated | 7,660 | 7,017 | ||||||
Long-term debt — affiliated | 500 | 500 | ||||||
Collateral financing arrangements | 2,692 | 2,382 | ||||||
Junior subordinated debt securities | 2,315 | 3,382 | ||||||
Payables for collateral under securities loaned and other transactions | 343 | 814 | ||||||
Other liabilities | 1,052 | 1,007 | ||||||
Total liabilities | 14,862 | 15,412 | ||||||
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; 798,016,664 and 786,766,664 shares issued at December 31, 2008 and 2007, respectively; 793,629,070 and 729,223,440 shares outstanding at December 31, 2008 and 2007, respectively | 8 | 8 | ||||||
Additional paid-in capital | 15,811 | 17,098 | ||||||
Retained earnings | 22,403 | 19,884 | ||||||
Treasury stock, at cost; 4,387,594 and 57,543,224 shares at December 31, 2008 and 2007, respectively | (236 | ) | (2,890 | ) | ||||
Accumulated other comprehensive income (loss) | (14,253 | ) | 1,078 | |||||
Total stockholders’ equity | 23,734 | 35,179 | ||||||
Total liabilities and stockholders’ equity | $ | 38,596 | $ | 50,591 | ||||
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(Parent Company Only)
For the Years Ended December 31, 2008, 2007 and 2006
(In millions)
2008 | 2007 | 2006 | ||||||||||
Condensed Statements of Income | ||||||||||||
Equity in earnings of subsidiaries | $ | 3,666 | $ | 4,632 | $ | 6,675 | ||||||
Net investment income | 167 | 274 | 140 | |||||||||
Net investment gains (losses) | (272 | ) | (41 | ) | (6 | ) | ||||||
Other income | 149 | 84 | — | |||||||||
Interest expense | (736 | ) | (733 | ) | (618 | ) | ||||||
Other expenses | (89 | ) | (62 | ) | (88 | ) | ||||||
Income before provision for income tax | 2,885 | 4,154 | 6,103 | |||||||||
Income tax expense (benefit) | (324 | ) | (163 | ) | (190 | ) | ||||||
Net income | 3,209 | 4,317 | 6,293 | |||||||||
Preferred stock dividends | 125 | 137 | 134 | |||||||||
Net income available to common shareholders | $ | 3,084 | $ | 4,180 | $ | 6,159 | ||||||
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(Parent Company Only)
For the Years Ended December 31, 2008, 2007 and 2006
(In millions)
2008 | 2007 | 2006 | ||||||||||
Condensed Statements of Cash Flows | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 3,209 | $ | 4,317 | $ | 6,293 | ||||||
Earnings of subsidiaries | (3,666 | ) | (4,632 | ) | (6,675 | ) | ||||||
Dividends from subsidiaries | 1,148 | 1,254 | 4,237 | |||||||||
Other, net | 509 | 248 | 60 | |||||||||
Net cash provided by operating activities | 1,200 | 1,187 | 3,915 | |||||||||
Cash flows from investing activities | ||||||||||||
Sales of fixed maturity securities | 3,970 | 5,203 | 1,123 | |||||||||
Purchases of fixed maturity securities | (2,983 | ) | (4,586 | ) | (3,575 | ) | ||||||
Sales of equity securities | — | 13 | — | |||||||||
Purchases of equity securities | (1 | ) | (32 | ) | — | |||||||
Net change in short-term investments | (1,073 | ) | — | 38 | ||||||||
Purchase of businesses | (202 | ) | — | (115 | ) | |||||||
Capital contribution to subsidiaries | (1,284 | ) | (422 | ) | (690 | ) | ||||||
Return of capital from subsidiaries | — | 526 | 413 | |||||||||
Repayment of loans to subsidiaries | 400 | 800 | — | |||||||||
Issuance of loans to subsidiaries | — | (700 | ) | — | ||||||||
Disposal of subsidiary | (43 | ) | — | — | ||||||||
Other, net | 57 | (60 | ) | — | ||||||||
Net cash (used in) provided by investing activities | (1,159 | ) | 742 | (2,806 | ) | |||||||
Cash flows from financing activities | ||||||||||||
Net change in short-term debt | (10 | ) | (306 | ) | (345 | ) | ||||||
Long-term debt repaid | — | — | (500 | ) | ||||||||
Cash paid in connection with collateral financing arrangements | (800 | ) | — | — | ||||||||
Junior subordinated debt securities issued | — | — | 1,248 | |||||||||
Debt issuance costs | (8 | ) | (7 | ) | (12 | ) | ||||||
Net change in payable for collateral under securities loaned and other transactions | (471 | ) | (282 | ) | 850 | |||||||
Common stock issued, net of issuance costs | 290 | — | — | |||||||||
Stock options exercised | 45 | 110 | 83 | |||||||||
Treasury stock acquired in connection with share repurchase agreements | (1,250 | ) | (1,705 | ) | (500 | ) | ||||||
Treasury stock issued in connection with common stock issuance, net of issuance costs | 1,936 | — | — | |||||||||
Treasury stock issued to settle stock forward contracts | 1,035 | — | — | |||||||||
Dividends on preferred stock | (125 | ) | (137 | ) | (134 | ) | ||||||
Dividends on common stock | (592 | ) | (541 | ) | (450 | ) | ||||||
Other, net | — | — | (1 | ) | ||||||||
Net cash provided by (used in) financing activities | 50 | (2,868 | ) | 239 | ||||||||
Change in cash and cash equivalents | 91 | (939 | ) | 1,348 | ||||||||
Cash and cash equivalents, beginning of year | 587 | 1,526 | 178 | |||||||||
Cash and cash equivalents, end of year | $ | 678 | $ | 587 | $ | 1,526 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid (received) during the year for: | ||||||||||||
Interest | $ | 696 | $ | 711 | $ | 596 | ||||||
Income tax | $ | (249 | ) | $ | (241 | ) | $ | (136 | ) | |||
Non-cash transactions during the year: | ||||||||||||
Disposal of subsidiary: | ||||||||||||
Investment in subsidiary disposed | $ | 1,716 | $ | — | $ | — | ||||||
Add: transaction costs, including cash paid of $43 | 60 | — | — | |||||||||
Less: treasury stock received in common stock exchange | (1,318 | ) | — | — | ||||||||
Loss on disposal of subsidiary | $ | 458 | $ | — | $ | — | ||||||
Remarketing of debt securities: | ||||||||||||
Fixed maturity securities redeemed | $ | 32 | $ | — | $ | — | ||||||
Long-term debt issued | $ | 1,035 | $ | — | $ | — | ||||||
Junior subordinated debt securities redeemed | $ | 1,067 | $ | — | $ | — | ||||||
Issuance of exchange bond to an affiliate | $ | — | $ | — | $ | 214 | ||||||
Contribution of goodwill to subsidiaries | $ | 22 | $ | — | $ | 32 | ||||||
Contribution of other intangible assets to subsidiaries, net of deferred income tax | $ | 97 | $ | — | $ | 558 | ||||||
Issuance of collateral financing arrangement | $ | 310 | $ | 2,382 | $ | — | ||||||
Capital contribution to subsidiary | $ | 310 | $ | 2,382 | $ | — | ||||||
Allocation of interest expense to subsidiary | $ | 107 | $ | 84 | $ | — | ||||||
Allocation of interest income to subsidiary | $ | 110 | $ | 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) | |
• | 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) |
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2. | Dispositions and Acquisition |
3. | Loans to Subsidiaries |
Interest | Maturity | December 31, | ||||||||||
Subsidiaries | Rate | Date | 2008 | 2007 | ||||||||
(In millions) | ||||||||||||
Metropolitan Life Insurance Company | 3-month LIBOR + 1.15% | December 31, 2009 | $ | 700 | $ | 700 | ||||||
Metropolitan Life Insurance Company | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
Metropolitan Life Insurance Company | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
MetLife Investors USA Insurance Company | 7.35% | April 1, 2035 | — | 400 | ||||||||
Total | $ | 1,200 | $ | 1,600 | ||||||||
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4. | Long-term and Short-term Debt |
December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Senior notes: | ||||||||
6.13% due 2011 | $ | 750 | $ | 750 | ||||
5.38% due 2012 | 399 | 398 | ||||||
5.00% due 2013 | 498 | 497 | ||||||
5.50% due 2014 | 351 | 352 | ||||||
5.00% due 2015 | 998 | 998 | ||||||
6.82% due 2018 | 1,035 | — | ||||||
5.25% due 2020 | 578 | 787 | ||||||
5.38% due 2024 | 503 | 687 | ||||||
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 | 7,660 | 7,017 | ||||||
Total long-term debt — affiliated | 500 | 500 | ||||||
Total | $ | 8,160 | $ | 7,517 | ||||
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Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In millions) | ||||||||||||
Short-term debt | $ | 10 | $ | 33 | $ | 59 | ||||||
Long-term debt — unaffiliated | 412 | 401 | 430 | |||||||||
Long-term debt — affiliated | 28 | 30 | 20 | |||||||||
Collateral financing arrangements | 121 | 84 | — | |||||||||
Junior subordinated debt securities | 164 | 183 | 106 | |||||||||
Stock purchase contracts | 1 | 2 | 3 | |||||||||
Total interest expense | $ | 736 | $ | 733 | $ | 618 | ||||||
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Letter of | ||||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
MetLife, Inc. | August 2009 | (1) | $ | 500 | $ | — | $ | 500 | $ | — | — | |||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 | (3) | 500 | — | 490 | 10 | 7 | |||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 | (2), (4) | 650 | — | 410 | 240 | 19 | |||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | (5) | 3,500 | 2,692 | — | 808 | 29 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 | (2), (6) | 2,896 | — | 1,359 | 1,537 | 29 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 | (2), (7) | 3,500 | — | 1,500 | 2,000 | 29 | |||||||||||||||||
Total | $ | 11,546 | $ | 2,692 | $ | 4,259 | $ | 4,595 | ||||||||||||||||
(1) | In December 2008, the Holding Company entered into an amended and restated one year $500 million letter of credit facility (dated as of August 2008 and amended and restated at December 31, 2008 with an unaffiliated financial institution. Exeter Reassurance Company, Ltd. is a co-applicant under this letter of credit facility. This letter of credit facility matures in August 2009, except that letters of credit outstanding upon termination may remain outstanding until August 2010. Fees for this agreement include a margin of 2.25% and a utilization fee of 0.05%, as applicable. The Holding Company incurred amendment costs of $1.3 million related to the $500 million amended and restated letter of credit facility, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | 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. | |
(4) | In December 2008, Exeter as borrower and the Holding Company as guarantor entered into an amendment of an existing credit agreement with an unaffiliated financial institution. Issuances under this facility are set to expire in December 2027. Exeter incurred amendment costs of $1.6 million related to the amendment of the existing credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. | |
(5) | In May 2007, MetLife Reinsurance Company of South Carolina (“MRSC”), a wholly-owned subsidiary of the Holding 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 Holding Company entered into a30-year collateral |
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financing arrangement as described in Note 11 of the Notes to the Consolidated Financial Statements, 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, 2008, $2.7 billion had been drawn upon under the collateral financing arrangement. | ||
(6) | In December 2007, Exeter terminated four letters of credit, with expirations from March 2025 through December 2026, which 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. | |
(7) | In September 2008, MRV and the Holding Company entered into a30-year, $3.5 billion letter of credit facility with an unaffiliated financial institution. These letters of credit serve as collateral for MRV’s obligations under a reinsurance agreement. |
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 0.55% in exchange for the payment of3-month LIBOR plus 1.12%, payable quarterly. Under this agreement, the Holding Company may also be required to pledge collateral or make payments to the unaffiliated financial institution related to any decline in the estimated fair value of the surplus notes and in connection with any early termination of this agreement. During the year ended December 31, 2008, the Holding Company paid $800 million to the unaffiliated financial institution related to a decline in the estimated fair value of the surplus notes. This payment reduced the amount under the agreement on which the Holding Company’s interest payment is due but did not reduce the outstanding amount of the surplus notes. In addition, the Holding Company had pledged collateral of $230 million to the unaffiliated financial institution at |
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December 31, 2008. No collateral had been pledged at December 31, 2007. The Holding Company’s net cost of 0.57% has been allocated to MRC. For the year ended December 31, 2008, this amount was $14 million. 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 0.70%, 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 estimated fair 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. For the year ended December 31, 2008, the Holding Company paid $320 million to the unaffiliated financial institution as a result of the decline in the estimated fair value of the assets in the trust. All of the $320 million was deposited into the trust. In January 2009, the Holding Company paid an additional $360 million to the unaffiliated financial institution as a result of the continued decline in the estimated fair value of the assets in trust which was also deposited into the trust. In addition, the Holding Company may be required to pledge collateral to the unaffiliated financial institution under this agreement. At December 31, 2008, the Holding Company had pledged $86 million under the agreement. No collateral had been pledged under the agreement as December 31, 2007. Interest expense incurred by the Holding Company under the collateral financing arrangement for the years ended December 31, 2008 and 2007 was $107 million and $84 million, respectively. The allocation of these financing costs to MRSC is included in other revenues and recorded as an additional investment in MRSC. |
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6. | Fair Value |
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Notional | Carrying | Estimated | ||||||||||
December 31, 2007 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 2,540 | $ | 2,540 | ||||||||
Equity securities | $ | 24 | $ | 24 | ||||||||
Cash and cash equivalents | $ | 587 | $ | 587 | ||||||||
Accrued investment income | $ | 62 | $ | 62 | ||||||||
Liabilities: | ||||||||||||
Short-term debt | $ | 310 | $ | 310 | ||||||||
Long-term debt — unaffiliated | $ | 7,017 | $ | 6,814 | ||||||||
Long-term debt — affiliated | $ | 500 | $ | 413 | ||||||||
Collateral financing arrangements | $ | 2,382 | $ | 2,164 | ||||||||
Junior subordinated debt securities | $ | 3,382 | $ | 3,268 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 814 | $ | 814 |
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Notional | Carrying | Estimated | ||||||||||
December 31, 2008 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 1,391 | $ | 1,391 | ||||||||
Equity securities | $ | 8 | $ | 8 | ||||||||
Short-term investments | $ | 1,073 | $ | 1,073 | ||||||||
Other invested assets (3) | $ | 1,332 | $ | 39 | $ | 39 | ||||||
Cash and cash equivalents | $ | 678 | $ | 678 | ||||||||
Accrued investment income | $ | 29 | $ | 29 | ||||||||
Loans to and receivables from subsidiaries | $ | 1,201 | $ | 984 | ||||||||
Other assets (1) | $ | 863 | $ | 692 | ||||||||
Liabilities: | ||||||||||||
Short-term debt | $ | 300 | $ | 300 | ||||||||
Long-term debt — unaffiliated | $ | 7,660 | $ | 6,348 | ||||||||
Long-term debt — affiliated | $ | 500 | $ | 351 | ||||||||
Collateral financing arrangements | $ | 2,692 | $ | 946 | ||||||||
Junior subordinated debt securities | $ | 2,315 | $ | 1,720 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 343 | $ | 343 | ||||||||
Other liabilities: (1) | ||||||||||||
Derivative liabilities | $ | 2,318 | $ | 634 | $ | 634 | ||||||
Other | $ | 176 | $ | 176 | ||||||||
Commitments: | ||||||||||||
Commitment under collateral financing arrangement (2) | $ | 1,700 | $ | — | $ | (502 | ) |
(1) | Carrying values presented herein differ from those presented in the condensed financial information because certain items within the respective balance sheet caption are not considered financial instruments. Balance sheet captions omitted from the table above are not considered financial instruments. | |
(2) | Commitment under collateral financing arrangement is an off-balance sheet liability and is not recognized in the condensed financial information. | |
(3) | Other invested assets is comprised of freestanding derivatives with positive estimated fair values. |
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December 31, 2008 | ||||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant | |||||||||||||||
Identical Assets | Significant Other | Unobservable | Total | |||||||||||||
and Liabilities | Observable Inputs | Inputs | Estimated | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 167 | $ | 3 | $ | 170 | ||||||||
Residential mortgage-backed securities | — | 859 | — | 859 | ||||||||||||
Foreign corporate securities | — | 11 | 22 | 33 | ||||||||||||
U.S. Treasury/agency securities | 108 | 72 | — | 180 | ||||||||||||
Commercial mortgage-backed securities | — | 1 | — | 1 | ||||||||||||
Asset-backed securities | — | 96 | 20 | 116 | ||||||||||||
Other fixed maturity securities | — | — | 32 | 32 | ||||||||||||
Total fixed maturity securities | 108 | 1,206 | 77 | 1,391 | ||||||||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | — | 1 | 7 | 8 | ||||||||||||
Total equity securities | — | 1 | 7 | 8 | ||||||||||||
Short-term investments | 886 | 187 | — | 1,073 | ||||||||||||
Derivative assets | — | 39 | — | 39 | ||||||||||||
Total assets | $ | 994 | $ | 1,433 | $ | 84 | $ | 2,511 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | — | $ | 634 | $ | — | $ | 634 | ||||||||
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||||||
Balance, | Impact of | Balance, | Other | Sales, | Transfer In | |||||||||||||||||||||||||||
December 31, | SFAS 157 | Beginning | Comprehensive | Issuances and | and/or Out | Balance, | ||||||||||||||||||||||||||
2007 | Adoption (1) | of Period | Earnings (2, 3) | Income (Loss) | Settlements (4) | of Level 3 (5) | End of Period | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Fixed maturity securities | $ | 197 | $ | — | $ | 197 | $ | (21 | ) | $ | (32 | ) | $ | (79 | ) | $ | 12 | $ | 77 | |||||||||||||
Equity securities | 21 | — | 21 | (12 | ) | (2 | ) | — | — | 7 |
7. | Subsequent Events |
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December 31, 2008, 2007 and 2006
(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) | ||||||||||||||
2008 | |||||||||||||||||||
Institutional | $ | 1,013 | $ | 58,484 | $ | 75,332 | $ | — | $ | 73 | |||||||||
Individual | 16,505 | 60,718 | 61,869 | 1,023 | 1,267 | ||||||||||||||
International | 2,436 | 10,468 | 5,654 | — | 583 | ||||||||||||||
Auto & Home | 183 | 3,126 | — | — | — | ||||||||||||||
Corporate & Other | 7 | 5,521 | 6,950 | — | — | ||||||||||||||
$ | 20,144 | $ | 138,317 | $ | 149,805 | $ | 1,023 | $ | 1,923 | ||||||||||
2007 | |||||||||||||||||||
Institutional | $ | 923 | $ | 55,064 | $ | 66,083 | $ | — | $ | 56 | |||||||||
Individual | 14,038 | 60,143 | 54,767 | 991 | 1,238 | ||||||||||||||
International | 2,648 | 11,121 | 4,961 | — | 544 | ||||||||||||||
Auto & Home | 193 | 3,324 | — | — | — | ||||||||||||||
Corporate & Other | 8 | 4,991 | 4,531 | — | — | ||||||||||||||
$ | 17,810 | $ | 134,643 | $ | 130,342 | $ | 991 | $ | 1,838 | ||||||||||
2006 | |||||||||||||||||||
Institutional | $ | 1,370 | $ | 53,511 | $ | 59,694 | $ | — | $ | 37 | |||||||||
Individual | 13,814 | 59,421 | 56,857 | 957 | 1,078 | ||||||||||||||
International | 2,117 | 9,346 | 4,198 | — | 373 | ||||||||||||||
Auto & Home | 190 | 3,453 | — | — | — | ||||||||||||||
Corporate & Other | 13 | 4,664 | 4,636 | — | — | ||||||||||||||
$ | 17,504 | $ | 130,395 | $ | 125,385 | $ | 957 | $ | 1,488 | ||||||||||
(1) | Amounts are included within the future policy benefits, other policyholder funds and policyholder dividend obligation column. |
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December 31, 2008, 2007 and 2006
(In millions)
Amortization of | ||||||||||||||||||||||||
Premium | Net | Policyholder | DAC and VOBA | Other | ||||||||||||||||||||
Revenue and | Investment | Benefits and | Charged to | Operating | Premiums Written | |||||||||||||||||||
Segment | Policy Charges | Income | Interest Credited | Other Expenses | Expenses (1) | (Excluding Life) | ||||||||||||||||||
2008 | ||||||||||||||||||||||||
Institutional | $ | 15,850 | $ | 7,535 | $ | 19,106 | $ | 151 | $ | 2,257 | $ | 5,594 | ||||||||||||
Individual | 7,881 | 6,509 | 7,807 | 2,498 | 4,384 | — | ||||||||||||||||||
International | 4,565 | 1,249 | 3,337 | 381 | 1,297 | 846 | ||||||||||||||||||
Auto & Home | 2,971 | 186 | 1,919 | 454 | 355 | 2,949 | ||||||||||||||||||
Corporate & Other | 28 | 817 | 55 | 5 | 1,893 | — | ||||||||||||||||||
$ | 31,295 | $ | 16,296 | $ | 32,224 | $ | 3,489 | $ | 10,186 | $ | 9,389 | |||||||||||||
2007 | ||||||||||||||||||||||||
Institutional | $ | 13,194 | $ | 8,176 | $ | 16,899 | $ | 251 | $ | 2,188 | $ | 4,972 | ||||||||||||
Individual | 7,922 | 7,025 | 7,678 | 1,211 | 4,507 | — | ||||||||||||||||||
International | 4,091 | 1,247 | 2,814 | 309 | 1,444 | 669 | ||||||||||||||||||
Auto & Home | 2,966 | 196 | 1,807 | 468 | 365 | 2,982 | ||||||||||||||||||
Corporate & Other | 35 | 1,419 | 46 | 11 | 1,398 | — | ||||||||||||||||||
$ | 28,208 | $ | 18,063 | $ | 29,244 | $ | 2,250 | $ | 9,902 | $ | 8,623 | |||||||||||||
2006 | ||||||||||||||||||||||||
Institutional | $ | 12,642 | $ | 7,260 | $ | 15,961 | $ | 182 | $ | 2,131 | $ | 4,575 | ||||||||||||
Individual | 7,633 | 6,863 | 7,353 | 896 | 4,285 | — | ||||||||||||||||||
International | 3,527 | 949 | 2,699 | 362 | 1,166 | 623 | ||||||||||||||||||
Auto & Home | 2,924 | 177 | 1,717 | 459 | 392 | 2,946 | ||||||||||||||||||
Corporate & Other | 37 | 998 | 38 | 5 | 1,357 | — | ||||||||||||||||||
$ | 26,763 | $ | 16,247 | $ | 27,768 | $ | 1,904 | $ | 9,331 | $ | 8,144 | |||||||||||||
(1) | Includes other expenses and policyholder dividends, excluding amortization of DAC and VOBA charged to other expenses. |
F-182
Table of Contents
December 31, 2008, 2007 and 2006
(In millions)
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2008 | ||||||||||||||||||||
Life insurance in-force | $ | 3,697,999 | $ | 715,741 | $ | 684,281 | $ | 3,666,539 | 18.7 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 17,252 | $ | 2,066 | $ | 1,224 | $ | 16,410 | 7.5 | % | ||||||||||
Accident and health | 6,741 | 444 | 226 | 6,523 | 3.5 | % | ||||||||||||||
Property and casualty insurance | 3,065 | 100 | 16 | 2,981 | 0.5 | % | ||||||||||||||
Total insurance premium | $ | 27,058 | $ | 2,610 | $ | 1,466 | $ | 25,914 | 5.7 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
Life insurance in-force | $ | 3,368,637 | $ | 566,998 | $ | 489,340 | $ | 3,290,979 | 14.9 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 15,184 | $ | 1,819 | $ | 965 | $ | 14,330 | 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 | $ | 24,149 | $ | 2,371 | $ | 1,192 | $ | 22,970 | 5.2 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
Life insurance in-force | $ | 3,588,979 | $ | 635,470 | $ | 67,599 | $ | 3,021,108 | 2.2 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 14,926 | $ | 1,621 | $ | 705 | $ | 14,010 | 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 | $ | 23,308 | $ | 2,184 | $ | 928 | $ | 22,052 | 4.2 | % | ||||||||||
F-183
Table of Contents
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
248
Table of Contents
249
Table of Contents
Item 9B. | Other Information |
250
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
251
Table of Contents
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
252
Table of Contents
Item 15. | Exhibits and Financial Statement Schedules |
253
Table of Contents
By | /s/ C. Robert Henrikson |
Title: | Chairman of the Board, President |
Signature | Title | Date | ||||
/s/ Sylvia Mathews Burwell Sylvia Mathews Burwell | Director | February 27, 2009 | ||||
/s/ Eduardo Castro-Wright Eduardo Castro-Wright | Director | February 27, 2009 | ||||
/s/ Burton A. Dole, Jr. Burton A. Dole, Jr. | Director | February 27, 2009 | ||||
/s/ Cheryl W. Grisé Cheryl W. Grisé | Director | February 27, 2009 | ||||
/s/ R. Glenn Hubbard R. Glenn Hubbard | Director | February 27, 2009 | ||||
/s/ John M. Keane John M. Keane | Director | February 27, 2009 | ||||
/s/ James M. Kilts James M. Kilts | Director | February 27, 2009 | ||||
/s/ Hugh B. Price Hugh B. Price | Director | February 27, 2009 | ||||
/s/ David Satcher, M.D. David Satcher, M.D. | Director | February 27, 2009 | ||||
/s/ Kenton J. Sicchitano Kenton J. Sicchitano | Director | February 27, 2009 |
254
Table of Contents
Signature | Title | Date | ||||
/s/ William C. Steere, Jr. William C. Steere, Jr. | Director | February 27, 2009 | ||||
/s/ Lulu C. Wang Lulu C. Wang | Director | February 27, 2009 | ||||
/s/ C. Robert Henrikson C. Robert Henrikson | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | February 27, 2009 | ||||
/s/ William J. Wheeler William J. Wheeler | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | February 27, 2009 | ||||
/s/ Joseph J. Prochaska, Jr. Joseph J. Prochaska, Jr. | Executive Vice President, Finance Operations and Chief Accounting Officer (Principal Accounting Officer) | February 27, 2009 |
255
Table of Contents
Exhibit | |||||||
No. | Description | ||||||
2 | .1 | Plan of Reorganization (Incorporated by reference to Exhibit 2.1 to MetLife, Inc.’s Registration Statement onForm S-1(No. 333-91517) (the“S-1 Registration Statement”)). | |||||
2 | .2 | Amendment to Plan of Reorganization dated as of March 9, 2000 (Incorporated by reference to Exhibit 2.2 to theS-1 Registration Statement). | |||||
2 | .3 | Acquisition Agreement between MetLife, Inc. and Citigroup Inc., dated as of January 31, 2005 (Incorporated by reference to Exhibit 2.1 to MetLife, Inc.’s Current Report onForm 8-K dated February 4, 2005). | |||||
3 | .1 | Amended and Restated Certificate of Incorporation of MetLife, Inc. (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006 (the “2006 Annual Report”)). | |||||
3 | .2 | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on April 7, 2000 (Incorporated by reference to Exhibit 3.2 to the 2006 Annual Report). | |||||
3 | .3 | Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005 (Incorporated by reference to Exhibit 99.5 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 10, 2005). | |||||
3 | .4 | Certificate of Designations of 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc., filed with the Secretary of State of Delaware on June 14, 2005 (Incorporated by reference to Exhibit 99.5 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 15, 2005). | |||||
3 | .5 | MetLife, Inc. Amended and Restated By-Laws effective June 19, 2007 (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 25, 2007 (the “June 2007Form 8-K”)). | |||||
4 | .1(a) | Indenture dated as of November 9, 2001 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to Senior Debt Securities (Incorporated by reference to Exhibit 4.1(a) to the 2006 Annual Report). | |||||
4 | .1(b) | Form of Indenture for Senior Debt Securities between MetLife, Inc. and one or more banking institutions to be qualified as Trustee pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939 (Included in Exhibit 4.1(a) incorporated by reference to Exhibit 4.1(a) to the 2006 Annual Report, except for the name of the trustee). |
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Exhibit | |||||||
No. | Description | ||||||
4 | .2 | Second Supplemental Indenture dated as of November 27, 2001 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 6.125% Senior Notes due December 1, 2011 (Incorporated by reference to Exhibit 4.3 to the 2006 Annual Report). | |||||
4 | .3 | Third Supplemental Indenture dated as of December 10, 2002 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.375% Senior Notes due December 15, 2012 (Incorporated by reference to Exhibit 4.3 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2007 (the “2007 Annual Report”). | |||||
4 | .4 | Fourth Supplemental Indenture dated as of December 10, 2002 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 6.50% Senior Notes due December 15, 2032 (Incorporated by reference to Exhibit 4.4 to the 2007 Annual Report). | |||||
4 | .5 | Fifth Supplemental Indenture dated as of November 21, 2003 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.875% Senior Notes due November 21, 2033. | |||||
4 | .6 | Sixth Supplemental Indenture dated as of November 24, 2003 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.00% Senior Notes due November 24, 2013. | |||||
4 | .7 | Seventh Supplemental Indenture dated as of June 3, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.50% Senior Notes due June 15, 2014 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 3, 2004 (the “June 2004Form 8-K”)). | |||||
4 | .8 | Eighth Supplemental Indenture dated as of June 3, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 6.375% Senior Notes due June 15, 2034 (Incorporated by reference to Exhibit 4.3 to the June 2004Form 8-K). | |||||
4 | .9 | Ninth Supplemental Indenture dated as of July 23, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.50% Senior Notes due June 15, 2014 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 23, 2004 (the “July 2004Form 8-K”)). | |||||
4 | .10 | Tenth Supplemental Indenture dated as of July 23, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 6.375% Senior Notes due June 15, 2034 (Incorporated by reference to Exhibit 4.3 to the July 2004Form 8-K). | |||||
4 | .11 | Eleventh Supplemental Indenture dated as of December 9, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.375% Senior Notes due December 9, 2024 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 9, 2004 (the “December 2004Form 8-K”)). | |||||
4 | .12 | Twelfth Supplemental Indenture dated as of June 23, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.00% Senior Notes due June 15, 2015 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 23, 2005 (the “June 23, 2005Form 8-K”)). | |||||
4 | .13 | Thirteenth Supplemental Indenture dated as of June 23, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.70% Senior Notes due June 15, 2035 (Incorporated by reference to Exhibit 4.3 to the June 23, 2005Form 8-K). |
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Table of Contents
Exhibit | |||||||
No. | Description | ||||||
4 | .14 | Fourteenth Supplemental Indenture dated as of June 29, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.25% Senior Notes due June 29, 2020 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 29, 2005 (the “June 29, 2005Form 8-K”)). | |||||
4 | .15 | Form of 6.125% Senior Note due December 1, 2011 (Included in Exhibit 4.2 incorporated by reference to Exhibit 4.3 to the 2006 Annual Report). | |||||
4 | .16 | Form of 5.375% Senior Note due December 15, 2012 (Included in Exhibit 4.3 incorporated by reference to Exhibit 4.3 to the 2007 Annual Report). | |||||
4 | .17 | Form of 6.50% Senior Note due December 15, 2032 (Included in Exhibit 4.4 incorporated by reference to Exhibit 4.4 to the 2007 Annual Report). | |||||
4 | .18 | Form of 5.875% Senior Note due November 21, 2033 (Included in Exhibit 4.5). | |||||
4 | .19 | Form of 5.00% Senior Note due November 24, 2013 (Included in Exhibit 4.6). | |||||
4 | .20 | Form of 5.50% Senior Note due June 15, 2014 (Included in Exhibit 4.7 incorporated by reference to Exhibit 4.1 to the June 2004Form 8-K). | |||||
4 | .21 | Form of 6.375% Senior Note due June 15, 2034 (Included in Exhibit 4.8 incorporated by reference to Exhibit 4.3 to the June 2004Form 8-K). | |||||
4 | .22 | Form of 5.50% Senior Note due June 15, 2014 (Included in Exhibit 4.9 incorporated by reference to Exhibit 4.1 to the July 2004Form 8-K). | |||||
4 | .23 | Form of 6.375% Senior Note due June 15, 2034 (Included in Exhibit 4.10 incorporated by reference to Exhibit 4.3 to the July 2004Form 8-K). | |||||
4 | .24 | Form of 5.375% Senior Note due December 9, 2024 (Included in Exhibit 4.11 incorporated by reference to Exhibit 4.1 to the December 2004Form 8-K). | |||||
4 | .25 | Form of 5.00% Senior Note due June 15, 2015 (Included in Exhibit 4.12 incorporated by reference to Exhibit 4.1 to the June 23, 2005Form 8-K). | |||||
4 | .26 | Form of 5.70% Senior Note due June 15, 2035 (Included in Exhibit 4.13 incorporated by reference to Exhibit 4.3 to the June 23, 2005Form 8-K). | |||||
4 | .27 | Form of 5.25% Senior Note due June 29, 2020 (Included in Exhibit 4.14 incorporated by reference to Exhibit 4.1 to the June 29, 2005Form 8-K). | |||||
4 | .28(a) | Indenture dated as of June 21, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to Subordinated Debt Securities (the “Subordinated Indenture”) (Incorporated by reference to Exhibit 4.5 to MetLife, Inc.’s Current Report onForm 8-K dated June 22, 2005 (the “June 22, 2005Form 8-K”)). | |||||
4 | .28(b) | Form of Indenture for Subordinated Debt Securities between MetLife, Inc. and one or more banking institutions to be qualified as Trustee pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939 (Incorporated by reference to Exhibit 4.28(a), except for the name of the trustee). | |||||
4 | .29 | First Supplemental Indenture dated as of June 21, 2005 to the Subordinated Indenture between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) (Incorporated by reference to Exhibit 4.6 to the June 22, 2005Form 8-K). | |||||
4 | .30 | Second Supplemental Indenture dated as of June 21, 2005 to the Subordinated Indenture between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) (Incorporated by reference to Exhibit 4.8 to the June 22, 2005Form 8-K). |
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Table of Contents
Exhibit | |||||||
No. | Description | ||||||
4 | .31 | Third Supplemental Indenture dated as of December 21, 2006 to the Subordinated Indenture between MetLife, Inc. and The Bank of New York Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association) (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 22, 2006 (the “December 2006Form 8-K”)). | |||||
4 | .32 | Sixth Supplemental Indenture dated as of August 7, 2008 to the Subordinated Indenture between MetLife, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association), as trustee (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated August 8, 2008). | |||||
4 | .33 | Seventh Supplemental Indenture dated February 6, 2009 for the Subordinated Indenture between MetLife, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association), as trustee (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated February 9, 2009). | |||||
4 | .34 | Form of Series A Debenture (Incorporated by reference to Exhibit 4.7 to the June 22, 2005Form 8-K). | |||||
4 | .35 | Form of Series B Debenture (Incorporated by reference to Exhibit 4.9 to the June 22, 2005Form 8-K). | |||||
4 | .36 | Form of junior subordinated debenture (Included in Exhibit 4.31 incorporated by reference to Exhibit 4.3 to the December 2006Form 8-K). | |||||
4 | .37 | Form of security certificate representing MetLife, Inc.’s 6.817% Senior Debt Securities, Series A, due 2018 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated August 15, 2008). | |||||
4 | .38 | Form of security certificate representing MetLife, Inc.’s 7.717% Senior Debt Securities, Series B, due 2019 (Incorporated by reference to Exhibit 4.1 to MetLife Inc.’s Current Report onForm 8-K dated February 18, 2009). | |||||
4 | .39 | Certificate of Trust of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.7 to MetLife, Inc.’s, MetLife Capital Trust II’s and MetLife Capital Trust III’s Registration Statement onForm S-3 (Nos.333-61282,333-61282-01 and333-61282-02) (the “2001S-3 Registration Statement”)). | |||||
4 | .40 | Certificate of Amendment to Certificate of Trust of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.6 to MetLife, Inc.’s., MetLife Capital Trust II’s and MetLife Capital Trust III’s Registration Statement onForm S-3 (Nos.333-112073,333-112073-01 and333-112073-02) (the “2004S-3 Registration Statement”)). | |||||
4 | .41 | Certificate of Trust of MetLife Capital Trust V (Incorporated by reference to Exhibit 4.3 to MetLife, Inc.’s, MetLife Capital Trust V’s, MetLife Capital Trust VI’s, MetLife Capital Trust VII’s, MetLife Capital Trust VIII’s and MetLife Capital Trust IX’s Registration Statement onForm S-3 (Nos.333-147180,333-147180-01,333-147180-02,333-147180-03,333-147180-04 and333-147180-05) (the “2007S-3 Registration Statement”)). | |||||
4 | .42 | Certificate of Trust of MetLife Capital Trust VI (Incorporated by reference to Exhibit 4.4 to the 2007S-3 Registration Statement). | |||||
4 | .43 | Certificate of Trust of MetLife Capital Trust VII (Incorporated by reference to Exhibit 4.5 to the 2007S-3 Registration Statement). | |||||
4 | .44 | Certificate of Trust of MetLife Capital Trust VIII (Incorporated by reference to Exhibit 4.6 to the 2007S-3 Registration Statement). | |||||
4 | .45 | Certificate of Trust of MetLife Capital Trust IX (Incorporated by reference to Exhibit 4.7 to the 2007S-3 Registration Statement). | |||||
4 | .46 | Amended and Restated Declaration of Trust of MetLife Capital Trust III dated as of June 21, 2005 (Incorporated by reference to Exhibit 4.17 to the June 22, 2005Form 8-K). | |||||
4 | .47 | Declaration of Trust of MetLife Capital Trust V (Incorporated by reference to Exhibit 4.8 to the 2007S-3 Registration Statement). |
E-4
Table of Contents
Exhibit | |||||||
No. | Description | ||||||
4 | .48 | Declaration of Trust of MetLife Capital Trust VI (Incorporated by reference to Exhibit 4.9 to the 2007S-3 Registration Statement). | |||||
4 | .49 | Declaration of Trust of MetLife Capital Trust VII (Incorporated by reference to Exhibit 4.10 to the 2007S-3 Registration Statement). | |||||
4 | .50 | Declaration of Trust of MetLife Capital Trust VIII (Incorporated by reference to Exhibit 4.11 to the 2007S-3 Registration Statement). | |||||
4 | .51 | Declaration of Trust of MetLife Capital Trust IX (Incorporated by reference to Exhibit 4.12 to the 2007S-3 Registration Statement). | |||||
4 | .52 | Form of Amended and Restated Declaration of Trust (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.13 to the 2007S-3 Registration Statement). | |||||
4 | .53 | Form of Trust Preferred Security Certificate (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Included in Exhibit 4.53 incorporated by reference to Exhibit 4.13 to the 2007S-3 Registration Statement). | |||||
4 | .54 | Guarantee Agreement dated June 21, 2005 by and between MetLife, Inc., as Guarantor, and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Guarantee Trustee, relating to MetLife Capital Trust III (Incorporated by reference to Exhibit 4.19 to the June 22, 2005Form 8-K). | |||||
4 | .55 | Form of Trust Preferred Securities Guarantee Agreement (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.15 to the 2007S-3 Registration Statement). | |||||
4 | .56 | Form of Common Securities Guarantee Agreement (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.16 to the 2007S-3 Registration Statement). | |||||
4 | .57 | Removal and Appointment of Trustees of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.10 to the 2004S-3 Registration Statement). | |||||
4 | .58 | Form of Certificate for Common Stock, par value $0.01 per share (Incorporated by reference to Exhibit 4.1 to theS-1 Registration Statement). | |||||
4 | .59 | Rights Agreement dated as of April 4, 2000 between MetLife, Inc. and ChaseMellon Shareholder Services, L.L.C. (predecessor to Mellon Investor Services LLC) (Incorporated by reference to Exhibit 4.48 to the 2006 Annual Report). | |||||
4 | .60 | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on April 7, 2000 (See Exhibit 3.2 above). | |||||
4 | .61 | Form of Right Certificate (Included as Exhibit B of Exhibit 4.59 incorporated by reference to Exhibit 4.48 to the 2006 Annual Report). | |||||
4 | .62 | Form of Warrant Agreement (Incorporated by reference to Exhibit 4.21 to the 2007S-3 Registration Statement)**. | |||||
4 | .63 | Form of Deposit Agreement (Incorporated by reference to Exhibit 4.22 to the 2007S-3 Registration Statement)**. | |||||
4 | .64 | Form of Depositary Receipt (Included in Exhibit 4.63)**. | |||||
4 | .65 | Form of Purchase Contract Agreement (Incorporated by reference to Exhibit 4.24 to the 2007S-3 Registration Statement)**. | |||||
4 | .66 | Form of Pledge Agreement (Incorporated by reference to Exhibit 4.25 to the 2007S-3 Registration Statement)**. |
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Table of Contents
Exhibit | |||||||
No. | Description | ||||||
4 | .67 | Form of Unit Agreement (Incorporated by reference to Exhibit 4.26 to the 2007S-3 Registration Statement)**. | |||||
4 | .68 | Stock Purchase Contract Agreement dated June 21, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Stock Purchase Contract Agent (Incorporated by reference to Exhibit 4.1 to the June 22, 2005Form 8-K). | |||||
4 | .69 | Form of Normal Common Equity Unit Certificate (Incorporated by reference to Exhibit 4.2 to the June 22, 2005Form 8-K). | |||||
4 | .70 | Form of Stripped Common Equity Unit Certificate (Incorporated by reference to Exhibit 4.3 to the June 22, 2005Form 8-K). | |||||
4 | .71 | Pledge Agreement dated as of June 21, 2005 among MetLife, Inc., JP Morgan Chase Bank, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Collateral Agent, Custodial Agent and Securities Intermediary, and J.P Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Stock Purchase Contract Agent (Incorporated by reference to Exhibit 4.4 to the June 22, 2005Form 8-K). | |||||
4 | .72 | Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005 (See Exhibit 3.3 above). | |||||
4 | .73 | Form of Stock Certificate, Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc. (Incorporated by reference of Exhibit 99.6 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 10, 2005). | |||||
4 | .74 | Certificate of Designations of 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc., filed with the Secretary of State of Delaware on June 14, 2005 (See Exhibit 3.4 above). | |||||
4 | .75 | Form of Stock Certificate, 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc. (Incorporated by reference to Exhibit 99.6 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 15, 2005). | |||||
4 | .76 | Replacement Capital Covenant, dated as of December 21, 2006 (Incorporated by reference to Exhibit 4.2 to the December 2006Form 8-K). | |||||
4 | .77 | Replacement Capital Covenant, dated as of December 12, 2007 (Incorporated by reference to Exhibit 4.2 to MetLife, Inc.’s Current Report onForm 8-K dated December 12, 2007). | |||||
4 | .78 | Replacement Capital Covenant, dated as of April 8, 2008 (Incorporated by reference to Exhibit 4.2 to MetLife, Inc.’s Current Report onForm 8-K dated April 8, 2008). | |||||
4 | .79 | Replacement Capital Covenant, dated as of December 30, 2008 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 30, 2008 (the “December 2008Form 8-K”)). | |||||
10 | .1 | MetLife Executive Severance Plan (effective as of December 17, 2007) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Current Report onForm 8-K dated December 13, 2007)*. | |||||
10 | .2 | MetLife, Inc. 2000 Stock Incentive Plan, as amended and restated March 28, 2000 (Incorporated by reference to Exhibit 10.7 to theS-1 Registration Statement)*. | |||||
10 | .3 | MetLife, Inc. 2000 Stock Incentive Plan, as amended, effective February 8, 2002 (Incorporated by reference to Exhibit 10.13 to the 2007 Annual Report)*. | |||||
10 | .4 | Form of Management Stock Option Agreement under the MetLife, Inc. 2000 Stock Incentive Plan*. | |||||
10 | .5 | MetLife, Inc. 2000 Directors Stock Plan, as amended and restated March 28, 2000 (Incorporated by reference to Exhibit 10.8 to theS-1 Registration Statement)*. | |||||
10 | .6 | MetLife, Inc. 2000 Directors Stock Plan, as amended effective February 8, 2002 (Incorporated by reference to Exhibit 10.17 to the 2007 Annual Report)*. | |||||
10 | .7 | Form of Director Stock Option Agreement under the MetLife, Inc. 2000 Directors Stock Plan*. |
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Exhibit | |||||||
No. | Description | ||||||
10 | .8 | MetLife, Inc. 2005 Stock and Incentive Compensation Plan, effective April 15, 2005 (the “2005 SIC Plan”) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2004 (the “First Quarter 200410-Q”))*. | |||||
10 | .9 | MetLife, Inc. 2005 Non-Management Director Stock Compensation Plan, effective April 15, 2005 (Incorporated by reference to Exhibit 10.3 to the First Quarter 200410-Q)*. | |||||
10 | .10 | Form of Management Stock Option Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated February 28, 2005 (the “February 28, 2005Form 8-K”))*. | |||||
10 | .11 | Form of Management Stock Option Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.4 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007 (the “First Quarter 200710-Q”))*. | |||||
10 | .12 | Amendment to Stock Option Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.1 to the First Quarter 200710-Q)*. | |||||
10 | .13 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.19 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2004)*. | |||||
10 | .14 | Amendment to Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Current Report onForm 8-K dated January 10, 2006 (the “January 10, 2006Form 8-K”))*. | |||||
10 | .15 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.4 to the January 10, 2006Form 8-K)*. | |||||
10 | .16 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.6 to the First Quarter 200710-Q)*. | |||||
10 | .17 | Amendment to Restricted Stock Unit Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.3 to the First Quarter 200710-Q)*. | |||||
10 | .18 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 11, 2007) (Incorporated by reference to Exhibit 10.5 to MetLife, Inc.’s Current Report onForm 8-K dated December 13, 2007 (the “December 13, 2007Form 8-K”))*. | |||||
10 | .19 | Amendment to Restricted Stock Unit Agreements under the 2005 SIC Plan (effective as of December 31, 2007) (Incorporated by reference to Exhibit 10.29 to the 2007 Annual Report)*. | |||||
10 | .20 | Form of Management Performance Share Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.2 to the February 28, 2005Form 8-K)*. | |||||
10 | .21 | Clarification of Management Performance Share Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Current Report onForm 8-K dated December 19, 2005 (the “December 2005Form 8-K”))*. | |||||
10 | .22 | Amendment to Management Performance Share Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.1 to the January 10, 2006Form 8-K))*. | |||||
10 | .23 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.3 to the January 10, 2006Form 8-K)*. | |||||
10 | .24 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective February 27, 2007) (Incorporated by reference to Exhibit 10.27 to the 2006 Annual Report)*. | |||||
10 | .25 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.5 to the First Quarter 200710-Q)*. | |||||
10 | .26 | Amendment to Management Performance Share Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.2 to the First Quarter 200710-Q)*. |
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Table of Contents
Exhibit | |||||||
No. | Description | ||||||
10 | .27 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective December 11, 2007) (Incorporated by reference to Exhibit 10.4 to the December 13, 2007Form 8-K)*. | |||||
10 | .28 | Amendment to Management Performance Share Agreements under the 2005 SIC Plan (effective as of December 31, 2007) (Incorporated by reference to Exhibit 10.3 to the December 13, 2007Form 8-K)*. | |||||
10 | .29 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective as of January 27, 2009) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated January 30, 2009)*. | |||||
10 | .30 | MetLife Policyholder Trust Agreement (Incorporated by reference to Exhibit 10.12 to theS-1 Registration Statement). | |||||
10 | .31 | Amendment to MetLife Policyholder Trust Agreement (Incorporated by reference to Exhibit 3.2 to the MetLife Policyholder Trust’s Annual Report onForm 10-K for the fiscal year ended December 31, 2007). | |||||
10 | .32 | Five-Year $3,000,000,000 Credit Agreement, dated as of June 20, 2007, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and other parties signatory thereto (Incorporated by reference to Exhibit 10.1 to the June 2007Form 8-K). | |||||
10 | .33 | Amended and Restated $2,850,000 Five-Year Credit Agreement, dated as of June 20, 2007 and amended and restated as of December 23, 2008, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and other parties signatory thereto (Incorporated by reference to Exhibit 10.1 to the December 2008Form 8-K). | |||||
10 | .34 | MetLife Annual Variable Incentive Plan (“AVIP”) (Incorporated by reference to Exhibit 10.1 to the First Quarter 200410-Q)*. | |||||
10 | .35 | Amendment Number One to the AVIP (Incorporated by reference to Exhibit 10.2 to the December 2005Form 8-K)*. | |||||
10 | .36 | Resolutions of the MetLife, Inc. Board of Directors (adopted December 12, 2006) regarding the selection of performance measures for 2007 awards under the AVIP (Incorporated by reference to Exhibit 10.42 to the 2006 Annual Report)*. | |||||
10 | .37 | Resolutions of the MetLife, Inc. Board of Directors (adopted December 11, 2007) regarding the selection of performance measures for 2008 awards under the AVIP (Incorporated by reference to Exhibit 10.54 to the 2007 Annual Report)*. | |||||
10 | .38 | Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective May 4, 2005) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2005 (the “First Quarter 200510-Q”))*. | |||||
10 | .39 | Amendment, dated as of August 1, 2005, to the Metropolitan Life Auxiliary Savings and Investment Plan (effective as of July 1, 2005) (Incorporated by reference to Exhibit 10.7 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2005)*. | |||||
10 | .40 | Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective January 1, 2008) (Incorporated by reference to Exhibit 10.57 to the 2007 Annual Report)*. | |||||
10 | .41 | MetLife Deferred Compensation Plan for Officers, as amended and restated, effective November 1, 2003*. | |||||
10 | .42 | Amendment Number One to the MetLife Deferred Compensation Plan for Officers, dated May 4, 2005 (Incorporated by reference to Exhibit 10.1 to the First Quarter 200510-Q”)*. | |||||
10 | .43 | Amendment Number Two to The MetLife Deferred Compensation Plan for Officers, effective December 14, 2005 (Incorporated by reference to Exhibit 10.7 to the December 2005Form 8-K)*. | |||||
10 | .44 | Amendment Number Three to The MetLife Deferred Compensation Plan for Officers (as amended and restated as of November 1, 2003, effective February 26, 2007) (Incorporated by reference to Exhibit 10.48 to the 2006 Annual Report)*. |
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Exhibit | |||||||
No. | Description | ||||||
10 | .45 | MetLife Leadership Deferred Compensation Plan, dated November 2, 2006 (as amended and restated effective with respect to salary and cash incentive compensation, January 1, 2005, and with respect to stock compensation, April 15, 2005) (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2006 (the “Third Quarter 200610-Q”))*. | |||||
10 | .46 | Amendment Number One to The MetLife Leadership Deferred Compensation Plan, dated December 13, 2007 (effective as of December 31, 2007) (Incorporated by reference to Exhibit 10.63 to the 2007 Annual Report)*. | |||||
10 | .47 | Amendment Number Two to The MetLife Leadership Deferred Compensation Plan, dated December 11, 2008 (effective December 31, 2008)*. | |||||
10 | .48 | MetLife Deferred Compensation Plan for Outside Directors (effective December 9, 2003)*. | |||||
10 | .49 | Amendment Number One to The MetLife Deferred Compensation Plan for Outside Directors (as amended and restated as of December, 2003, effective February 26, 2007) (Incorporated by reference to Exhibit 10.51 to the 2006 Annual Report)*. | |||||
10 | .50 | MetLife Non-Management Director Deferred Compensation Plan, dated November 2, 2006 (as amended and restated, effective January 1, 2005) (Incorporated by reference to Exhibit 10.4 to the Third Quarter 200610-Q)*. | |||||
10 | .51 | Amendment Number One to The MetLife Non-Management Director Deferred Compensation Plan (as amended and restated as of December, 2006, effective February 26, 2007) (Incorporated by reference to Exhibit 10.53 to the 2006 Annual Report)*. | |||||
10 | .52 | MetLife Non-Management Director Deferred Compensation Plan, dated December 5, 2007 (as amended and restated, effective January 1, 2005) (Incorporated by reference to Exhibit 10.68 to the 2007 Annual Report)*. | |||||
10 | .53 | The MetLife Non-Management Director Deferred Compensation Plan, dated December 9, 2008 (as amended and restated effective January 1, 2005)*. | |||||
10 | .54 | MetLife, Inc. Director Indemnity Plan (dated and effective July 22, 2008) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 25, 2008)*. | |||||
10 | .55 | MetLife Auxiliary Pension Plan dated August 7, 2006 (as amended and restated, effective June 30, 2006) (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2006 (the “Second Quarter 200610-Q”))*. | |||||
10 | .56 | MetLife Auxiliary Pension Plan dated December 21, 2006 (amending and restating Part I thereof, effective January 1, 2007) (Incorporated by reference to Exhibit 10.57 to the 2006 Annual Report)*. | |||||
10 | .57 | MetLife Auxiliary Pension Plan dated December 21, 2007 (amending and restating Part I thereof, effective January 1, 2008) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 28, 2007)*. | |||||
10 | .58 | Amendment #1 to the MetLife Auxiliary Pension Plan (as amended and restated effective January 1, 2008) dated October 24, 2008 (effective October 1, 2008)*. | |||||
10 | .59 | Amendment Number Two to the MetLife Auxiliary Pension Plan (as amended and restated effective January 1, 2008) dated December 12, 2008 (effective December 31, 2008)*. | |||||
10 | .60 | MetLife Plan for Transition Assistance for Officers, dated January 7, 2000, as amended (the “MPTA”) (Incorporated by reference to Exhibit 10.4 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2004)*. | |||||
10 | .61 | Amendment Number Ten to the MPTA, dated January 26, 2005* (Incorporated by reference to Exhibit 10.55 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2005 (the “2005 Annual Report”))*. | |||||
10 | .62 | Amendment Number Eleven to the MPTA, dated February 28, 2006 (Incorporated by reference to Exhibit 10.56 to the 2005 Annual Report)*. | |||||
10 | .63 | Amendment Number Twelve to the MPTA, dated August 7, 2006 (Incorporated by reference to Exhibit 10.1 to the Second Quarter 200610-Q)*. |
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Exhibit | |||||||
No. | Description | ||||||
10 | .64 | Amendment Number Thirteen to the MPTA, dated August 7, 2006 (Incorporated by reference to Exhibit 10.2 to the Second Quarter 200610-Q)*. | |||||
10 | .65 | Amendment Number Fourteen to the MPTA, dated January 26, 2007 (Incorporated by reference to Exhibit 10.63 to the 2006 Annual Report)*. | |||||
10 | .66 | Amendment Number Fifteen to the MPTA, dated June 1, 2007 (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2007)*. | |||||
10 | .67 | Amendment Number Sixteen to the MPTA, dated December 12, 2007 (Incorporated by reference to Exhibit 10.81 to the 2007 Annual Report)*. | |||||
10 | .68 | Amendment Number Seventeen to the MPTA, dated June 3, 2008 (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2008)*. | |||||
10 | .69 | Amendment Number Eighteen to the MPTA, dated August 13, 2008*. | |||||
10 | .70 | Amendment Number Nineteen to the MPTA, dated December 8, 2008*. | |||||
10 | .71 | Amendment Number Twenty to the MPTA, dated December 16, 2008*. | |||||
10 | .72 | Amendment Number Twenty-One to the MPTA, dated December 18, 2008*. | |||||
10 | .73 | One Madison Avenue Purchase and Sale Agreement, dated as of March 29, 2005, between Metropolitan Life Insurance Company, as Seller, and 1 Madison Venture LLC and Column Financial, Inc., collectively, as Purchaser (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated April 4, 2005 (the “April 4, 2005Form 8-K”)). | |||||
10 | .74 | MetLife Building, 200 Park Avenue, New York, NY Purchase and Sale Agreement, dated as of April 1, 2005, between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development, L.L.C., as Purchaser (Incorporated by reference to Exhibit 10.2 to the April 4, 2005Form 8-K). | |||||
10 | .75 | Stuyvesant Town, New York, New York, Purchase and Sale Agreement between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development Corp., as Purchaser, dated as of October 17, 2006 (Incorporated by reference to Exhibit 10.1 to the Third Quarter 200610-Q). | |||||
10 | .76 | Peter Cooper Village, New York, New York, Purchase and Sale Agreement between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development Corp., as Purchaser, dated as of October 17, 2006 (Incorporated by reference to Exhibit 10.2 to the Third Quarter 200610-Q). | |||||
10 | .77 | International Distribution Agreement dated as of July 1, 2005 between MetLife, Inc. and Citigroup Inc. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2005 (the “July 8, 2005Form 8-K”)). | |||||
10 | .78 | Domestic Distribution Agreement dated as of July 1, 2005 between MetLife, Inc. and Citigroup Inc. (Incorporated by reference to Exhibit 10.2 to the July 8, 2005Form 8-K). | |||||
12 | .1 | Statement re: Computation of Ratios of Earnings to Fixed Charges. | |||||
21 | .1 | Subsidiaries of the Registrant. | |||||
23 | .1 | Consent of Deloitte & Touche LLP. | |||||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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Table of Contents
* | Indicates management contracts or compensatory plans or arrangements. | |
** | Indicates document to be filed as an exhibit to a Current Report onForm 8-K or Quarterly Report onForm 10-Q pursuant to Item 601 ofRegulation S-K and incorporated herein by reference. |
E-11