MetLife 2003 Annual Report Download - page 31

effective for contracts entered into or modified after June 30, 2003. The Company’s adoption of SFAS 149 on July 1, 2003 did not have a significant
impact on the consolidated financial statements.
During 2003, the Company adopted FASB Interpretation No. 46 Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51
(‘‘FIN 46’’) and its December 2003 revision (‘‘FIN 46(r)’’). Certain of the Company’s asset-backed securitizations, collateralized debt obligations, structured
investment transactions, and investments in real estate joint ventures and other limited partnership interests meet the definition of a variable interest entity
(‘‘VIE’’) and must be consolidated, in accordance with the transition rules and effective dates, if the Company is deemed to be the primary beneficiary. A
VIE is defined as (i) any entity in which the equity investments at risk in such entity do not have the characteristics of a controlling financial interest, or
(ii) any entity that does not have sufficient equity at risk to finance its activities without additional subordinated support from other parties. Effective
February 1, 2003, the Company adopted FIN 46 for VIEs created or acquired on or after February 1, 2003 and, effective December 31, 2003, the
Company adopted FIN 46(r) with respect to interests in entities formerly considered special purpose entities (‘‘SPEs’’), including interests in asset-backed
securities and collateralized debt obligations. In accordance with the provisions of FIN 46(r), the Company has elected to defer until March 31, 2004 the
consolidation of interests in VIEs for non SPEs acquired prior to February 1, 2003 for which it is the primary beneficiary. The adoption of FIN 46 as of
February 1, 2003 did not have a significant impact on the Company’s consolidated financial statements. The adoption of the provisions of FIN 46(r) at
December 31, 2003 did not require the Company to consolidate any additional VIEs that were not previously consolidated.
During 2003, the Company adopted or applied the following accounting standards and/or interpretations: (i) FASB Interpretation (‘‘FIN’’) No. 45,
Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others; (ii) SFAS No. 148,
Accounting for Stock-Based Compensation — Transition and Disclosure; (iii) SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities; and (iv) SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
None of the accounting standards and/or interpretations described in this paragraph had a significant impact on the Company’s consolidated financial
statements.
During 2002, the Company adopted or applied the following accounting standards: (i) SFAS No. 141, Business Combinations (‘‘SFAS 141’’),
(ii) SFAS No. 142, and (iii) SFAS No. 144. In accordance with SFAS 141, the elimination of $5 million of negative goodwill was reported in net income in
the first quarter of 2002 as a cumulative effect of a change in accounting. On January 1, 2002, the Company adopted SFAS 142. Amortization of
goodwill prior to the adoption of SFAS 142 was $47 million for the year ended December 31, 2001. Amortization of other intangible assets was not
material for the years December 31, 2003, 2002 and 2001. The Company completed the required impairment tests of goodwill and indefinite-lived
intangible assets in the third quarter of 2002 and recorded a $5 million charge to earnings relating to the impairment of certain goodwill assets as a
cumulative effect of a change in accounting. There was no impairment of identified intangible assets or significant reclassifications between goodwill and
other intangible assets at January 1, 2002. Adoption of SFAS 144 did not have a material impact on the Company’s consolidated financial statements
other than the presentation as discontinued operations of net investment income and net investment gains related to operations of real estate on which
the Company initiated disposition activities subsequent to January 1, 2002 and the classification of such real estate as held-for-sale on the consolidated
balance sheets.
Investments
The Company had total cash and invested assets at December 31, 2003 and 2002 of $221.8 billion and $190.7 billion, respectively. In addition, the
Company had $75.8 billion and $59.7 billion held in its separate accounts, for which the Company generally does not bear investment risk, as of
December 31, 2003 and 2002, respectively.
The Company’s primary investment objective is to maximize net investment income consistent with acceptable risk parameters. The Company is
exposed to three primary sources of investment risk:
)credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest;
)interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates; and
)market valuation risk.
The Company manages risk through in-house fundamental analysis of the underlying obligors, issuers, transaction structures and real estate
properties. The Company also manages credit risk and market valuation risk through industry and issuer diversification and asset allocation. For real
estate and agricultural assets, the Company manages credit risk and valuation risk through geographic, property type, and product type diversification
and asset allocation. The Company manages interest rate risk as part of its asset and liability management strategies, product design, such as the use of
market value adjustment features and surrender charges, and proactive monitoring and management of certain non-guaranteed elements of its products,
such as the resetting of credited interest and dividend rates for policies that permit such adjustments.
The following table summarizes the Company’s cash and invested assets at:
December 31,
2003 2002
Carrying % of Carrying % of
Value Total Value Total
(Dollars in millions)
Fixed maturities available-for-sale, at fair value ***************************************** $167,752 75.6% $140,288 73.6%
Mortgage loans on real estate******************************************************* 26,249 11.8 25,086 13.2
Policy loans ********************************************************************** 8,749 4.0 8,580 4.5
Cash and cash equivalents ********************************************************* 3,733 1.7 2,323 1.2
Real estate and real estate joint ventures held-for-investment***************************** 4,714 2.1 3,926 2.1
Other invested assets ************************************************************* 4,645 2.1 3,727 1.9
Equity securities, at fair value and other limited partnership interests *********************** 4,075 1.8 4,008 2.1
Short-term investments ************************************************************ 1,826 0.8 1,921 1.0
Real estate held-for-sale *********************************************************** 89 0.1 799 0.4
Total cash and invested assets**************************************************** $221,832 100.0% $190,658 100.0%
MetLife, Inc.
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