MetLife 2002 Annual Report Download - page 3

chairman’s letter
To MetLife Shareholders:
A few years ago, MetLife stood before the investment community and made some powerful promises.
We laid out specific financial and operational objectives that we would work to achieve over the next
several years. We said we would achieve increasing profitability across the enterprise and efficiently
utilize excess capital while improving returns to shareholders. And we said our newly instituted perform-
ance management culture would drive MetLife to higher levels of performance.
This December, as the MetLife senior management team and I stood before 200 members of the
investment community during our annual Investor Day, the message was clear and unequivocal. We are
delivering on our promises. We are doing what we said we would do and are well on the way
to achieving our ambitious goals, despite the hurdles that we and others in the industry have faced.
The year 2002 was good for MetLife in terms of financial performance. We delivered to our shareholders results consistent with
investment community expectations and, in fact, exceeded our target of 11.5% operating return on equity, ending the year at 11.7%. We
delivered to our customers the continued pledge to build financial freedom for everyone. This is what it’s all about—earning the trust of
our various constituencies as we have done for the past 135 years.
Particularly today, in light of stock market volatility, the recent spate of corporate scandals, and the uncertain geopolitical landscape,
customers want to deal with a company they can trust. They want a financially strong company that will be there for them, in good times
and bad, to deliver on its guarantees and provide the products they need to feel secure and confident. They want to deal with employees
they can trust to offer the highest level of objective advice and counsel. And they want to do business with a company which has
integrity as one of its core values.
Customers want to do business with a company like MetLife, and this year we benefited from this flight to quality. Through disciplined
and strategic financial management and solid business growth, we are increasingly well positioned in the marketplace. Our earnings,
despite some significant market hurdles and a difficult operating environment, continue to reflect the diversity, strength and financial
flexibility of MetLife’s businesses.
In 2002, we continued to focus on our capital management. As volatile equity markets in 2002 caused rating agencies to take a more
cautious view of the insurance industry, we worked quickly to defend our ratings by increasing capital in our primary insurance operating
entity, Metropolitan Life Insurance Company. We did so, in part, from the sale of 17 real estate properties during the fourth quarter that
had a carrying value of approximately $840 million. This special initiative, which is a portion of the company’s total real estate sales
program, provided us in excess of $500 million in statutory gains. Capital was also raised through a $1 billion debt offering in December,
the proceeds of which were used to increase capital in Metropolitan Life Insurance Company and for other general corporate purposes.
The combination of these and other actions enhanced Metropolitan Life Insurance Company’s risk based capital ratio, a measure of
financial strength and security used by regulators, rating agencies and investors.
HBusiness Growth Outpaces the Market
Throughout our lines of business, we surpassed a number of goals this year as we continued to grow and enhance our operations.
The exceptional results of Institutional Business resulted in an operating return on allocated equity of 23.0%, as the business exper-
ienced strong top line sales growth and continued expense efficiencies. In fact, our business growth in many cases outpaced the
market, a clear sign that we are improving our competitive positioning.
In 2002, we set out to reduce expenses in our Individual Business operation by $200 million, before income taxes. We exceeded our
goal and delivered expense savings of $220 million, before income taxes. We realized these savings through rigorous expense
discipline, aggressive utilization of technology and development of common platforms to support many of our functional operations.
In addition to the expense savings in Individual Business, our distribution channels in this operation nimbly shifted gears to
accommodate market demands through their broad array of fixed offerings to compensate for the lower demand for variable products.
Increases in whole life, universal life and term life insurance sales offset declines in equity-linked insurance products, while the launch of
a new line of annuity products created new market opportunities in the agent and broker-dealer channels.