MetLife 2004 Annual Report Download - page 18

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$79 million benefit related to a reduction in the Mexican operation’s policyholder liabilities resulting from a change in reserve methodology, partially offset
by a related increase of $45 million in amortization of VOBA. Additionally, Taiwan’s 2003 expenses include a $30 million pre-tax charge due to an
increased loss recognition reserve as a result of low interest rates relative to product guarantees. Excluding these items, expenses increased
$341 million, or 16%, over the prior year. Expenses grew by $71 million, $98 million, $58 million and $36 million for the operations in Mexico, South
Korea, Chile and Taiwan, respectively, which is commensurate with the revenue growth discussed above. In addition, 2004 includes a $33 million
decrease in Mexico’s policyholder liabilities resulting from the application of SOP 03-1. Canada’s expenses increased by $13 million due primarily to the
strengthening of the liability on its pension business related to changes in mortality assumptions in the fourth quarter of 2004. Changes in foreign
currency exchange rates contributed $18 million to the year over year increase in expenses. The remainder of the increase in total expenses is primarily
related to the ongoing investment in infrastructure.
Year ended December 31, 2003 compared with the year ended December 31, 2002 — International
Net income increased by $124 million, or 148%, to $208 million for the year ended December 31, 2003 from $84 million for the comparable 2002
period. The acquisition of Hidalgo accounted for $48 million of this increase. Also contributing to the increase in earnings during 2003 is a $62 million
benefit, net of income taxes, from the merger of the Mexican operations and a reduction in policyholder liabilities resulting from a change in reserve
methodology, a $12 million tax benefit in Chile and an $8 million benefit, net of income taxes, related to reinsurance treaties. These increases are partially
offset by a $19 million charge, net of income taxes, in Taiwan related to an increased loss recognition reserve due to low interest rates relative to product
guarantees.
Total revenues, excluding net investment gains and losses, increased by $402 million, or 19%, to $2,532 million for the year ended December 31,
2003 from $2,130 million for the comparable 2002 period. This increase is primarily due to the acquisition of Hidalgo, which accounted for $469 million of
the variance, partially offset by decreases in Canada of $106 million attributable to a non-recurring sale of an annuity contract and $28 million relating to
the restructuring of a pension contract from an investment-type product to a long-term annuity, both of which occurred in 2002. In addition, South
Korea’s, Chile’s and Taiwan’s revenues increased by $102 million, $60 million and $36 million, respectively, primarily due to business growth. These
increases are partially offset by a $161 million decrease in Mexico, excluding Hidalgo. Anticipated actions taken by the Mexican government adversely
impacted the insurance and annuities market and resulted in a decline in premiums in Mexico’s group and individual life businesses. In addition, the
cancellation of a large broker-sponsored case at the end of 2002 and the weakening of the peso also contributed to the 2003 decline in Mexico.
Total expenses increased by $306 million, or 15%, to $2,315 million for the year ended December 31, 2003 from $2,009 million for the comparable
2002 period. The acquisition of Hidalgo contributed $394 million to this increase. Partially offsetting this is a decrease of $106 million for the
aforementioned non-recurring sale of an annuity contract and a decrease of $28 million for the restructuring of a pension contract, both of which
occurred in 2002. In addition, South Korea’s, Chile’s and Taiwan’s expenses increased by $95 million, $65 million and $64 million, respectively,
commensurate with the revenue increases in each country. Additionally, Taiwan’s expenses include a $30 million pre-tax charge due to an increased loss
recognition reserve as a result of low interest rates relative to product guarantees. These increases are partially offset by a $251 million decrease in
Mexico, other than Hidalgo, primarily as a result of the impact on expenses from the aforementioned revenue decline in Mexico and a reduction in
policyholder liabilities related to a change in reserve methodology.
Reinsurance
The following table presents consolidated financial information for the Reinsurance segment for the years indicated:
Year Ended December 31,
2004 2003 2002
(Dollars in millions)
Revenues
Premiums ************************************************************************** $3,367 $2,668 $2,005
Net investment income *************************************************************** 588 473 421
Other revenues ********************************************************************* 57 49 43
Net investment gains (losses) ********************************************************* 60 31 (3)
Total revenues ****************************************************************** 4,072 3,221 2,466
Expenses
Policyholder benefits and claims ******************************************************* 2,725 2,136 1,554
Interest credited to policyholder account balances **************************************** 212 184 146
Policyholder dividends**************************************************************** 20 21 22
Other expenses ********************************************************************* 964 740 617
Total expenses****************************************************************** 3,921 3,081 2,339
Income before provision for income taxes *********************************************** 151 140 127
Provision for income taxes ************************************************************ 51 48 43
Income from continuing operations before cumulative effect of a change in accounting ********* 100 92 84
Cumulative effect of a change in accounting, net of income taxes *************************** 5——
Net income ************************************************************************ $ 105 $ 92 $ 84
Year ended December 31, 2004 compared with the year ended December 31, 2003 — Reinsurance
Income from continuing operations increased $8 million, or 9%, to $100 million for the year ended December 31, 2004 from $92 million for the
comparable 2003 period. This increase is attributable to a 26% increase in revenues, primarily due to strong premium growth across all of RGA’s
geographical segments, which includes the effect of the Allianz Life transaction. The growth in income from continuing operations is partially offset by
higher minority interest expense as MetLife’s ownership in RGA decreased from 59% to 52% in the comparable periods and a negotiated claim
settlement in RGA’s accident and health business, which is currently in run-off, of $8 million for the third quarter of 2004, net of income taxes and minority
interest.
MetLife, Inc. 15