MetLife 2004 Annual Report Download - page 90

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
under APB 25. Had compensation expense for grants awarded prior to January 1, 2003 been determined based on fair value at the date of grant in
accordance with SFAS 123, the Company’s earnings and earnings per share amounts would have been reduced to the following pro forma amounts:
Years Ended December 31,
2004 2003 2002
(Dollars in millions, except
per share data)
Net income ********************************************************************************* $2,758 $2,217 $1,605
Charge for conversion of company-obligated mandatorily redeemable securities of a subsidiary trust(1) ***** — (21) —
Net income available to common shareholders **************************************************** $2,758 $2,196 $1,605
Add: Stock option-based employee compensation expense included in reported net income, net of income
taxes ************************************************************************************* $26$11 $ 1
Deduct: Total stock option-based employee compensation determined under fair value based method for all
awards, net of income taxes ***************************************************************** $ (44) $ (40) $ (33)
Pro forma net income available to common shareholders(2) ***************************************** $2,740 $2,167 $1,573
Basic earnings per share
As reported ********************************************************************************* $ 3.68 $ 2.98 $ 2.28
Pro forma(2) ********************************************************************************* $ 3.65 $ 2.94 $ 2.23
Diluted earnings per share
As reported ********************************************************************************* $ 3.65 $ 2.94 $ 2.20
Pro forma(2) ********************************************************************************* $ 3.63 $ 2.90 $ 2.15
(1) See Note 8 for a discussion of this charge included in the calculation of net income available to common shareholders.
(2) The pro forma earnings disclosures are not necessarily representative of the effects on net income and earnings per share in future years.
The Company also awards stock-based compensation to certain levels of management under the Company’s Long Term Performance Compensa-
tion Plan (‘‘LTPCP’’). LTPCP awards vest in their entirety at the end of the three year performance period. Each participant is assigned a target
compensation amount at the inception of the performance period with the final compensation amount determined by the performance of the Holding
Company’s stock over the three-year vesting period, subject to management’s discretion. Final awards may be paid in whole or in part with shares of the
Holding Company’s stock. Compensation expense related to the LTPCP was $49 million, $45 million, and $23 million for the years ended December 31,
2004, 2003 and 2002, respectively.
For the years ended December 31, 2004, 2003 and 2002, stock-based compensation expense related to the Company’s Stock Incentive Plan,
Directors Stock Plan and LTPCP was $89 million, $63 million and $25 million, respectively, including stock-based compensation for non-employees of
$468 thousand, $550 thousand and $2 million, respectively.
Statutory Equity and Income
The National Association of Insurance Commissioners (‘‘NAIC’’) adopted the Codification of Statutory Accounting Principles (‘‘Codification’’) in 2001.
Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles
continue to be established by individual state laws and permitted practices. The New York State Department of Insurance has adopted Codification with
certain modifications for the preparation of statutory financial statements of insurance companies domiciled in New York. Modifications by the various
state insurance departments may impact the effect of Codification on the statutory capital and surplus of Metropolitan Life and the Holding Company’s
other insurance subsidiaries.
Statutory accounting practices differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy
benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt and valuing securities on a different basis.
Statutory net income of Metropolitan Life, a New York domiciled insurer, was $2,648 million, $2,169 million and $1,455 million for the years ended
December 31, 2004 2003 and 2002, respectively. Statutory capital and surplus, as filed with the New York State Department of Insurance, was
$8,804 million and $7,967 million at December 31, 2004 and 2003, respectively.
MIAC was merged into another Delaware incorporated entity, MTL, on October 8, 2004. Statutory net income of MTL (including MIAC), as filed with
the Delaware Insurance Department, was $144 million for the year ended December 31, 2004. Statutory net income of MIAC, as filed with the Delaware
Insurance Department, was $341 million and $34 million for the years ended December 31, 2003 and 2002, respectively. Statutory capital and surplus
of MTL, as filed, was $1,195 million as of December 31, 2004. Statutory capital and surplus of MIAC, as filed, was $1,051 million at December 31,
2003.
Statutory net income of Metropolitan Property and Casualty Insurance Company, which is domiciled in Rhode Island, as filed with the Insurance
Department of Rhode Island, was $356 million, $214 million and $173 million for the years ended December 31, 2004, 2003 and 2002, respectively.
Statutory capital and surplus, as filed, was $1,875 million and $1,996 million at December 31, 2004 and 2003, respectively.
MetLife, Inc. F-47