MetLife 2001 Annual Report Download - page 73

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax
assets and liabilities consisted of the following:
December 31,
2001 2000
(Dollars in millions)
Deferred income tax assets:
Policyholder liabilities and receivables***************************************************************** $ 3,727 $3,057
Net operating losses ****************************************************************************** 336 262
Employee benefits ******************************************************************************** 123 167
Litigation related ********************************************************************************** 279 232
Other ******************************************************************************************* 438 348
4,903 4,066
Less: Valuation allowance ************************************************************************** 114 78
4,789 3,988
Deferred income tax liabilities:
Investments ************************************************************************************** 2,157 1,330
Deferred policy acquisition costs ******************************************************************** 2,950 2,752
Net unrealized investment gains ********************************************************************* 1,079 621
Other ******************************************************************************************* 129 37
6,315 4,740
Net deferred income tax liability *********************************************************************** $(1,526) $ (752)
Domestic net operating loss carryforwards amount to $533 million at December 31, 2001 and expire in 2021. Foreign net operating loss
carryforwards amount to $401 million at December 31, 2001 and were generated in various foreign countries with expiration periods of five years to
infinity.
The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance
reflects management’s assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net
operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these
deferred income tax assets are realizable.
The Internal Revenue Service has audited the Company for the years through and including 1996. The Company is being audited for the years
1997, 1998, 1999 and 2000. The Company believes that any adjustments that might be required for open years will not have a material effect on the
Company’s consolidated financial statements.
15. Reinsurance
The Company’s life insurance operations participate in reinsurance in order to limit losses, minimize exposure to large risks, and to provide additional
capacity for future growth. Risks in excess of $25 million on single survivorship policies and $30 million on joint survivorship policies are 100 percent
coinsured. Life reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term and coinsurance. In addition, the
Company has exposure to catastrophes, which are an inherent risk of the property and casualty insurance business and could contribute to significant
fluctuations in the Company’s results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum
loss, provide greater diversification of risk and minimize exposure to larger risks. The Company is contingently liable with respect to ceded reinsurance
should any reinsurer be unable to meet its obligations under these agreements.
The Company is engaged in life reinsurance whereby it indemnifies other insurance companies for all or a portion of the insurance risk underwritten
by the ceding companies.
See Note 11 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales
practices claims.
The amounts in the consolidated statements of income are presented net of reinsurance ceded. The effects of reinsurance were as follows:
Years ended December 31,
2001 2000 1999
(Dollars in millions)
Direct premiums ********************************************************************** $16,332 $15,661 $13,249
Reinsurance assumed ***************************************************************** 2,907 2,918 484
Reinsurance ceded ******************************************************************* (2,027) (2,262) (1,645)
Net premiums ************************************************************************ $17,212 $16,317 $12,088
Reinsurance recoveries netted against policyholder benefits ********************************** $ 2,002 $ 1,942 $ 1,626
Reinsurance recoverables, included in premiums and other receivables, were $3,358 million and $3,410 million at December 31, 2001 and 2000,
respectively, including $1,356 million and $1,359 million, respectively, relating to reinsurance of long-term guaranteed interest contracts and structured
settlement lump sum contracts accounted for as a financing transaction. Reinsurance and ceded commissions payables, included in other liabilities,
were $295 million and $225 million at December 31, 2001 and 2000, respectively.
MetLife, Inc.
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