MetLife 2005 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... and, according to LIMRA and MetLife Market Research, continues to hold the number one ranking in sales of group life, auto and home, long-term care and disability products, as well as institutional annuities and structured settlements. While generating record sales growth in multiple product lines...

  • Page 3
    ..., book value increased 19% over 2004 to $35.83 per diluted common share. MetLife also increased its common stock dividend 13% over 2004 to $0.52 per common share. H Moving Ahead In 2005, MetLife celebrated its fifth anniversary as a public company and its 137th year of providing financial solutions...

  • Page 4
    ... and Financial Disclosure Management's Annual Report on Internal Control Over Financial Reporting Attestation Report of the Company's Registered Public Accounting Firm Financial Statements Board of Directors Executive Officers Corporate Information 2 2 5 53 57 57 57 59 60 60 61 MetLife, Inc...

  • Page 5
    ... life and investment-type product policy fees 3,828 Net investment income(2 14,910 Other revenues 1,271 Net investment gains (losses)(2)(3)(4 93) Total revenues(5)(6)(7)(8 Expenses: Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends...

  • Page 6
    2005 2004 At December 31, 2003 (In millions) 2002 2001 Balance Sheet Data(1) Assets: General account assets Separate account assets Total assets(5)(6 Liabilities: Life and health policyholder liabilities(9 Property and casualty policyholder liabilities Short-term debt Long-term debt ...

  • Page 7
    ...Income (loss) from discontinued operations, net of income taxes $5 10 (5) - (5) 10 $5 $5 14 (9) - (9) - $(9) 2004 $4 9 (5) - (5) - $(5) $5 8 (3) - (3) - $(3) $3 6 (3) - (3) - $(3) 2001 At December 31, 2003 2002 (In millions) General account assets Total assets Life and health policyholder...

  • Page 8
    ... calculations with respect to the nuances of the Company's businesses. As part of the economic capital process a portion of net investment income is credited to the segments based on the level of allocated equity. Acquisitions and Dispositions On September 29, 2005, the Company completed the sale...

  • Page 9
    ... cash on-hand, the purchase price was financed through the issuance of common stock as described above, debt securities, common equity units and preferred shares. See ''- Liquidity and Capital Resources - The Holding Company - Liquidity Sources.'' On January 31, 2005, the Company completed the sale...

  • Page 10
    ...ï¬,ects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash ï¬,ows from the insurance and annuity contracts in force at the acquisition date. VOBA is...

  • Page 11
    ... Inc. offers life insurance, annuities, automobile and homeowners insurance and retail banking services to individuals, as well as group insurance, reinsurance and retirement & savings products and services to corporations and other institutions. Outside the United States, the MetLife companies have...

  • Page 12
    ... sales growth across most of the Company's business segments, as well as the positive impact of the U.S. financial markets on policy fees. Policy fees from variable life and annuity and investment-type products are typically calculated as a percentage of the average assets in policyholder accounts...

  • Page 13
    ...retirement & savings-type products. Group insurance premium growth, for example, with respect to life and disability products, are closely tied to employers' total payroll growth. Additionally, the potential market for these products is expanded by new business creation. Bond portfolio credit losses...

  • Page 14
    ... growth in separate account products, favorable underwriting, a decrease in the closed block-related policyholder dividend obligation, lower annuity net guaranteed benefit costs and lower DAC amortization. These increases were partially offset by lower net investment income, net investment losses...

  • Page 15
    ... increase is primarily due to sales growth and the acquisition of new business in the non-medical health & other business, as well as improved sales and favorable persistency in group life and higher structured settlement sales and pension close-outs in retirement & savings. The Reinsurance segment...

  • Page 16
    ... income, partially offset by a reduction in the Company's closed block premiums as the business continues to run-off. Interest rate spreads, which generally represent the margin between net investment income and interest credited to policyholder account balances, increased across the Institutional...

  • Page 17
    ...Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Total revenues Expenses Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends Other expenses Total expenses Income...

  • Page 18
    ..., dental and accidental death and dismemberment (''AD&D'') products of $360 million. In addition, continued growth in the long-term care business contributed $138 million, of which $25 million is related to the 2004 acquisition of TIAA/CREF's long-term care business. Group life insurance premiums...

  • Page 19
    ... Premiums 4,502 Universal life and investment-type product policy fees 2,476 Net investment income 6,535 Other revenues 477 Net investment gains (losses 50) Total revenues Expenses Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends...

  • Page 20
    ...of growth in the business and improved overall market performance. Policy fees from variable life and annuity and investment-type products are typically calculated as a percentage of the average assets in policyholder accounts. The value of these assets can ï¬,uctuate depending on equity performance...

  • Page 21
    ...of growth in the business and improved overall market performance. Policy fees from variable life and annuity and investment-type products are typically calculated as a percentage of the average assets in policyholder accounts. The value of these assets can ï¬,uctuate depending on equity performance...

  • Page 22
    ...Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Total revenues Expenses Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends Other expenses Total expenses Income...

  • Page 23
    ..., policyholder dividends and interest credited to policyholder accounts increased by $86 million due to the business growth primarily in the bank distribution channel business, as well as to an increase in the liabilities for annuity benefits, which, like net investment income on related assets...

  • Page 24
    ...Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Total revenues Expenses Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends Other expenses Total expenses Income...

  • Page 25
    ... interest credited to policyholder account balances, primarily associated with RGA's growth in insurance in force of approximately $200 billion, a negotiated claim settlement in RGA's accident and health business of $24 million, and the inclusion of only six months of results from the Allianz Life...

  • Page 26
    ... of a change in accounting, net of income taxes Cumulative effect of a change in accounting, net of income taxes Net income Preferred stock dividends Charge for conversion of company-obligated mandatorily redeemable securities of a subsidiary trust Net income available to common shareholders...

  • Page 27
    ... public offering in April 2000, the Holding Company and MetLife Capital Trust I, a wholly-owned trust, (the ''Trust'') issued equity security units (the ''units''). Each unit originally consisted of (i) a contract to purchase, for $50, shares of the Holding Company's common stock (the ''purchase...

  • Page 28
    ... note which matured on May 15, 2005. MetLife Bank has entered into several repurchase agreements with the Federal Home Loan Bank of New York (the ''FHLB of NY'') whereby MetLife Bank has issued such repurchase agreements in exchange for cash and for which the FHLB of NY has been granted a blanket...

  • Page 29
    ...'s actual future cash funding requirements. Liquidity Uses Insurance Liabilities. The Company's principal cash outï¬,ows primarily relate to the liabilities associated with its various life insurance, property and casualty, annuity and group pension products, operating expenses and income taxes, as...

  • Page 30
    ... securities loaned and other transactions Long-term debt(3 Mortgage commitments Partnership investments(4 Junior subordinated debt securities underlying common equity units(5 Operating leases Shares subject to mandatory redemption(3 Capital leases Contracts to purchase real estate Total...

  • Page 31
    ... in operating cash ï¬,ows in 2005 over the comparable 2004 period is primarily attributable to the acquisition of Travelers, growth in disability, dental, long-term care business, group life and retirement & savings, as well as continued growth in the annuity business. Net cash provided by operating...

  • Page 32
    ..., partially offset by an increase in MetLife Bank's customer deposits, particularly in the personal and business savings accounts. The 2003 period included payments of $1,006 million received on the settlement of common stock purchase contracts (see ''- Results of Operations - MetLife Capital Trust...

  • Page 33
    ... cash, cash equivalents, short-term investments and marketable fixed maturity securities. At December 31, 2005 and 2004, the Holding Company had $668 million and $2.1 billion in liquid assets, respectively. Global Funding Sources. Liquidity is also provided by a variety of both short-term and long...

  • Page 34
    ...and Series B trust preferred securities, respectively, in payment of any accrued and unpaid distributions. Each stock purchase contract requires (i) the Holding Company to pay the holder of the common equity unit quarterly contract payments on the stock purchase contracts at the annual rate of 1.510...

  • Page 35
    ... preferred stock, capital contributions to subsidiaries, payment of general operating expenses, acquisitions and the repurchase of the Holding Company's common stock. Dividends. On November 15, 2005, the Holding Company's board of directors declared dividends of $0.3077569 per share, for a total of...

  • Page 36
    ...700 $400 100 - - $500 Share Repurchase. On October 26, 2004, the Holding Company's Board of Directors authorized a $1 billion common stock repurchase program. Under this authorization, the Holding Company may purchase its common stock from the MetLife Policyholder Trust, in the open market and in...

  • Page 37
    ... the share price is greater than $43.45 and less than $53.10. See ''- Liquidity and Capital Resources - The Holding Company - Liquidity Sources - Common Equity Units'' for further description of such arrangements. Guarantees In the course of its business, the Company has provided certain indemnities...

  • Page 38
    ...'' accounts. Such plan accumulations are commonly referred to as cash balance plans. Eligible participants accounts are credited monthly for benefits equal to five percent of eligible monthly pay, and an additional five percent on the excess eligible monthly pay over the current social security...

  • Page 39
    ... retirement age 5.82% 3%-8% 61 5.87% 3%-8% 61 The discount rate is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of highquality debt instruments available on the valuation date, which would provide the necessary future cash...

  • Page 40
    ... increase in service cost and amortization of actuarial losses resulting largely from a declining discount rate, partially offset by the impact of an increase in the expected rates of return on plan assets. The weighted average discount rate used to calculate the net periodic pension cost was 5.83...

  • Page 41
    ..., less withdrawals, distributions, allocable expenses relating to the purchase, sale and maintenance of the assets and an allocable part of such separate accounts' investment expenses. Separate account investments in fixed income and equity securities are generally carried at published market value...

  • Page 42
    ... of pension plan assets within the separate accounts is as follows: December 31, Weighted Weighted Average Target Average Allocation 2005 2004 2006 Asset Category Equity securities Fixed maturities Other (Real Estate and Alternative Investments Total 47% 37% 16% 100% 50% 36% 14% 100% 30%-65...

  • Page 43
    ... and closely related to the host contract. Therefore, the embedded derivative feature is measured at fair value on the balance sheet and changes in fair value are reported in income. As a result of the adoption of Issue B36, the Company recorded a cumulative effect of a change in accounting of...

  • Page 44
    ... 2005, the American Institute of Certified Public Accountants (''AICPA'') issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (''SOP 05-1''). SOP 05-1 provides guidance on accounting by insurance...

  • Page 45
    ... under certain variable annuity and life contracts and income taxes. Certain other contracts sold by the Company provide for a return through periodic crediting rates, surrender adjustments or termination adjustments based on the total return of a contractually referenced pool of assets owned by the...

  • Page 46
    ...fication 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...

  • Page 47
    ... the Company's investment portfolio for the years ended December 31, 2005, 2004 and 2003. 2005 December 31, 2004 (In millions) 2003 FIXED MATURITIES Yield(2 Investment income(3 Net investment gains (losses Ending assets(3 MORTGAGE AND CONSUMER LOANS Yield(2 Investment income(4 Net investment...

  • Page 48
    ...income. Fixed Maturities and Equity Securities Available-for-Sale Fixed maturities consist principally of publicly traded and privately placed debt securities, and represented 75.2% and 73.8% of total cash and invested assets at December 31, 2005 and 2004, respectively. Based on estimated fair value...

  • Page 49
    ...Fixed Maturity and Equity Security Impairment. The Company classifies all of its fixed maturities and equity securities as available-for-sale and marks them to market through other comprehensive income, except for non-marketable private equities, which are generally carried at cost. All securities...

  • Page 50
    ...records impairments as investment losses and adjusts the cost basis of the fixed maturities and equity securities accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. Impairments of fixed maturities and equity securities were $64 million, $102 million...

  • Page 51
    .... Home equity loan and credit card receivables, accounting for about 31% and 26% of the total holdings, respectively, constitute the largest exposures in the Company's asset-backed securities portfolio. At December 31, 2005, $6,084 million, or 52.6%, of total asset-backed securities were rated Aaa...

  • Page 52
    ... mortgage loans as loans in which the Company, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The Company defines potentially delinquent loans as loans that, in management's opinion, have a high...

  • Page 53
    ... mortgages and auto loans. Real Estate and Real Estate Joint Ventures $11 $6 5 (4) $7 $6 1 (1) $6 The Company's real estate and real estate joint venture investments consist of commercial properties located primarily in the United States. At December 31, 2005 and 2004, the carrying value...

  • Page 54
    ... fair value of embedded derivatives related to funds withheld and modified coinsurance contracts. Interest accrues to these funds withheld at rates defined by the treaty terms and may be contractually specified or directly related to the investment portfolio. The Company's other invested assets...

  • Page 55
    ... with a fair market value of $427 million, which is held in separate custodial accounts. Such collateral is included in other assets and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheet. The Company is...

  • Page 56
    ...2005, management restructured the portfolio of assets that were acquired, generally reducing the amount of market risk associated with the acquired block, in line with the Company's overall investment strategy. The acquisition also changed the profile of the Company's foreign currency exchange rate...

  • Page 57
    ... market prices. The Company's investments in equity securities expose it to changes in equity prices, as do certain liabilities that involve long-term guarantees on equity performance. It manages this risk on an integrated basis with other risks through its asset/liability management strategies...

  • Page 58
    ... loss in fair value for each market risk exposure of the Company's portfolio, as of the period indicated was: December 31, 2005 (In millions) Non-trading: Interest rate risk Equity price risk Foreign currency exchange rate risk Trading: Interest rate risk $5,570 $ 556 $ 728 $ 6 MetLife...

  • Page 59
    ... the yield Amount Fair Value curve. (In millions) Assets Fixed maturities Equity securities Mortgage and consumer loans Policy loans Short-term investments Cash and cash equivalents Mortgage loan commitments Total assets Liabilities Policyholder account balances Short-term debt Long-term...

  • Page 60
    ... of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Financial management has documented and evaluated the effectiveness of the internal control of the Company as of December 31, 2005 pertaining to financial reporting in...

  • Page 61
    Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MetLife, Inc. We have audited management's assessment, included in management's annual report on internal control over financial reporting, that MetLife, Inc. and subsidiaries (the ''Company'') ...

  • Page 62
    Financial Statements INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Financial Statements at December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003: Consolidated Balance Sheets Consolidated Statements of Income ...

  • Page 63
    Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MetLife, Inc.: We have audited the accompanying consolidated balance sheets of MetLife, Inc. and subsidiaries (the ''Company'') as of December 31, 2005 and 2004, and the related consolidated ...

  • Page 64
    ...-for-sale Current income taxes payable 69 Deferred income taxes payable 1,706 Payables for collateral under securities loaned and other transactions 34,515 Other liabilities 12,300 Separate account liabilities 127,869 Total liabilities Stockholders' Equity: Preferred stock, par value $0.01...

  • Page 65
    ...data) 2005 2004 2003 REVENUES Premiums Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Total revenues EXPENSES Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends...

  • Page 66
    ... stock purchase contracts related to common equity units Dividends on preferred stock Dividends on common stock Comprehensive income (loss): Net income Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes Unrealized investment gains (losses...

  • Page 67
    ...Change in insurance-related liabilities 5,709 Change in trading securities 244) Change in income taxes payable 528 Change in other assets 346 Change in other liabilities 506 Other, net 387) Net cash provided by operating activities 8,005 Cash ï¬,ows from investing activities Sales, maturities...

  • Page 68
    ... disposed Contribution of equity securities to MetLife Foundation Accrual for stock purchase contracts related to common equity units Purchase money mortgage on real estate sale MetLife Capital Trust I transactions Real estate acquired in satisfaction of debt Transfer from funds withheld at...

  • Page 69
    ... Inc. offers life insurance, annuities, automobile and homeowners insurance and retail banking services to individuals, as well as group insurance, reinsurance and retirement & savings products and services to corporations and other institutions. Outside the United States, the MetLife companies have...

  • Page 70
    ...ï¬,ects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash ï¬,ows from the insurance and annuity contracts in force at the acquisition date. VOBA is...

  • Page 71
    ... the Company's consolidated financial statements and liquidity. Significant Accounting Policies Investments The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities...

  • Page 72
    ... on the Company's consolidated balance sheet either as assets within other invested assets or as liabilities within other liabilities at fair value as determined by quoted market prices or through the use of pricing models. Values can be affected by changes in interest rates, foreign exchange rates...

  • Page 73
    ... changes in fair value recognized in the current period in net investment gains (losses). Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Property...

  • Page 74
    ... and 3% to 12% for international business, and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends. Future policy benefits for non-participating traditional life insurance policies are equal to the aggregate...

  • Page 75
    ...losses). Any additional fees represent ''excess'' fees and are reported in universal life and investment-type product policy fees. Other Policyholder Funds Other policyholder funds includes policy and contract claims and unearned policy and contract fees. Recognition of Insurance Revenue and Related...

  • Page 76
    ... include advisory fees, broker/dealer commissions and fees, and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Other revenues also include changes in account value relating to corporate-owned life insurance (''COLI''). Under...

  • Page 77
    ... by Accounting Principles Board (''APB'') Opinion No. 25, Accounting for Stock Issued to Employees (''APB 25''). Note 14 includes the pro forma disclosures required by SFAS No. 123, as amended. The intrinsic value method represents the quoted market price or fair value of the equity award at...

  • Page 78
    ...on the Company's consolidated financial statements. In September 2005, the American Institute of Certified Public Accountants (''AICPA'') issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (''SOP...

  • Page 79
    ... under certain variable annuity and life contracts and income taxes. Certain other contracts sold by the Company provide for a return through periodic crediting rates, surrender adjustments or termination adjustments based on the total return of a contractually referenced pool of assets owned by the...

  • Page 80
    ...to cash on-hand, the purchase price was financed through the issuance of common stock as described above, debt securities as described in Note 8, common equity units as described in Note 9 and preferred shares as described in Note 14. The acquisition is being accounted for using the purchase method...

  • Page 81
    ... debt securities associated with common equity units Preferred stock Common stock Total sources of funds $4,198 2,716 2,134 2,100 1,010 $12,158 $ 128 64 Uses: Debt and equity issuance costs Investment in MetLife Capital Trusts II and III Acquisition costs 113 Purchase price paid...

  • Page 82
    ...contracts acquired and represents the portion of the purchase price that is allocated to the value of the right to receive future cash ï¬,ows from the life insurance and annuity contracts in force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business...

  • Page 83
    ... per share data) Revenues Premiums Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Total revenues Expenses Policyholder benefits and claims Interest credited to policyholder account balances Policyholder dividends...

  • Page 84
    ... 31, 2005, MetLife recorded restructuring costs, including severance, relocation and outplacement services of Travelers' employees, as liabilities assumed in the purchase business combination. Management currently estimates total restructuring costs associated with such actions to approximate...

  • Page 85
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) December 31, 2004 Cost or Amortized Cost Gross Unrealized Gain Loss (In millions) Estimated Fair Value % of Total U.S. corporate securities Residential mortgage-backed securities Foreign corporate securities U.S. treasury/...

  • Page 86
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Unrealized Losses for Fixed Maturities and Equity Securities Available-for-Sale The following tables show the estimated fair values and gross unrealized losses of the Company's fixed maturities (aggregated by sector) and equity ...

  • Page 87
    ... consolidated financial statements. Assets on Deposit and Held in Trust The Company had investment assets on deposit with regulatory agencies with a fair market value of $1,597 million and $1,390 million at December 31, 2005 and 2004, respectively, consisting primarily of fixed maturity securities...

  • Page 88
    ... $32,406 77% 18 5 100% Mortgage loans are collateralized by properties primarily located in the United States. At December 31, 2005, approximately 22%, 9% and 7% of the properties were located in California, New York and Illinois, respectively. Generally, the Company (as the lender) requires that...

  • Page 89
    ...The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from one to 15 years, but in certain circumstances are as long as 30 years. These receivables are generally collateralized by the related property. The Company's deferred income tax...

  • Page 90
    ... Equity securities 247 Derivatives 142) Minority interest 171) Other 102) Total Amounts allocated from: Future policy benefit loss recognition DAC and VOBA Participating contracts Policyholder dividend obligation Total Deferred income taxes Total Net unrealized investment gains (losses...

  • Page 91
    ... of sale Unrealized investment gains (losses) relating to: Future policy benefit gains (losses) recognition Deferred policy acquisition costs Participating contracts Policyholder dividend obligation Deferred income taxes Balance, end of year Net change in unrealized investment gains (losses...

  • Page 92
    ... different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of...

  • Page 93
    ... hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based...

  • Page 94
    ... table provides the settlement payments recorded in income for the: Years Ended December 31, 2005 2004 2003 (In millions) Qualifying hedges: Net investment income Interest credited to policyholder account balances Other expenses Non-qualifying hedges: Net investment gains (losses Total $ 42...

  • Page 95
    ... default swaps to diversify its credit risk exposure in certain portfolios; (vi) equity futures, equity index options, interest rate futures and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (vii) swap spread locks to hedge invested assets...

  • Page 96
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 5. Insurance Deferred Policy Acquisition Costs and Value of Business Acquired Information regarding DAC and VOBA for the years ended December 31, 2005, 2004 and 2003 is as follows: Deferred Policy Acquisition Costs Value of ...

  • Page 97
    ... offset by improved claims management on non-medical health long-term care. Guarantees The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (i) return of no less than total deposits made to the contract less any partial withdrawals (''return of net...

  • Page 98
    ...$ 57 33 (12) 78 52 (6) $124 Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows at: December 31, 2005 2004 (In millions) Mutual Fund Groupings Equity Bond Balanced Money Market Specialty Total $58,461 6,133 4,804 1,075 1,004 $71...

  • Page 99
    ... 31, 2005 and 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. 6. Reinsurance The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide...

  • Page 100
    ...respectively Equity securities available-for-sale, at fair value (cost: $1,180 and $898, respectively Mortgage loans on real estate Policy loans Short-term investments Other invested assets Total investments Cash and cash equivalents Accrued investment income Deferred income taxes Premiums...

  • Page 101
    ... Premiums Net investment income and other revenues Net investment gains (losses Total revenues Expenses Policyholder benefits and claims Policyholder dividends Change in policyholder dividend obligation Other expenses Total expenses Revenues, net of expenses before income taxes Income...

  • Page 102
    ...included in other assets. These costs are being amortized using the effective interest method over the term of the related senior notes. MetLife Bank National Association (''MetLife Bank'' or ''MetLife Bank, N.A.'') is a member of the Federal Home Loan Bank of New York (the ''FHLB of NY'') and holds...

  • Page 103
    ... in a registered public offering on June 21, 2005. As described below, the common equity units consist of interests in trust preferred securities issued by MetLife Capital Trusts II and III, and stock purchase contracts issued by the Holding Company. The only assets of MetLife Capital Trusts II and...

  • Page 104
    ... public offering in April 2000, the Holding Company and MetLife Capital Trust I, a wholly-owned trust (the ''Trust''), issued equity security units (the ''units''). Each unit originally consisted of (i) a contract to purchase, for $50, shares of the Holding Company's common stock (the ''purchase...

  • Page 105
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) ($1,662 million) over the contract price of the stock issued to the purchase contract holders ($1,006 million) was $656 million, which was recorded as a direct reduction to retained earnings. Due to the dissolution of the Trust ...

  • Page 106
    ... income tax assets: Policyholder liabilities and receivables Net operating loss carryforwards Capital loss carryforwards Tax credit carryforwards Intangibles Litigation related Other Less: Valuation allowance Deferred income tax liabilities: Investments Deferred policy acquisition costs...

  • Page 107
    ... Metropolitan Life merged in 1996, and General American, which was acquired in 2000, have been settled. In October 2000, a federal court approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies issued by New England Mutual between...

  • Page 108
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) claims in 2004. Accordingly, Metropolitan Life now reports that it received approximately 23,900 asbestos-related claims in 2004. The total number of asbestos personal injury claims pending against Metropolitan Life as of the ...

  • Page 109
    ... and a sub-class of New York owners of such policies in an action asserting that Metropolitan Life breached their policies and violated New York's General Business Law in the manner in which it allocated investment income across lines of business during a period ending with the 2000 demutualization...

  • Page 110
    ... amended class action complaint consolidating the claims from separate actions that had been filed in or transferred to the District of New Jersey. The consolidated amended complaint alleges that the Holding Company, Metropolitan Life, several other insurance companies and several insurance brokers...

  • Page 111
    ... class action complaint was filed in Connecticut state court against The Travelers Life and Annuity Company (''TLAC''), Travelers Equity Sales, Inc. and certain former affiliates. The amended complaint alleges Travelers Property Casualty Corporation, a former TLAC affiliate, purchased structured...

  • Page 112
    METLIFE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Argentina As a part of the Travelers acquisition, the Company acquired Citigroup's insurance operations in Argentina. The Argentinean economic, regulatory and legal environment, including interpretations of laws and regulations ...

  • Page 113
    ... plans covering eligible employees and sales representatives. Retirement benefits are based upon years of credited service and final average or career average earnings history. The Subsidiaries also provide certain postemployment benefits and certain postretirement health care and life insurance...

  • Page 114
    ...523 Service cost 142 Interest cost 318 Plan participants' contributions Acquisitions and divestitures 1) Actuarial losses (gains 90 Change in benefits Transfers in (out) of controlled group 6 Benefits paid 312) Projected benefit obligation at end of year Change in plan assets: Fair value...

  • Page 115
    ... derived rate. The weighted expected return on plan assets for use in that plan's valuation in 2006 is currently anticipated to be 8.25% for pension benefits and other postretirement medical benefits and 6.25% for other postretirement life benefits. The assumed health care cost trend rates used...

  • Page 116
    ... maximizing returns and minimizing volatility of net assets through adequate asset diversification. Adjustments are made to target allocations based on an assessment of the impact of economic factors and market conditions. The account values of the group annuity and life insurance contracts issued...

  • Page 117
    ..., including the Company's capital position, its financial strength and credit ratings, general market conditions and the price of the Holding Company's common stock. On December 16, 2004, the Holding Company repurchased 7,281,553 shares of its outstanding common stock at an aggregate cost of $300...

  • Page 118
    ...distribution within 30 days of its filing. Under Rhode Island State Insurance Code, the Rhode Island Superintendent has broad discretion in determining whether the financial condition of a stock property and casualty insurance company would support the payment of such dividends to its shareholders...

  • Page 119
    ... under that plan by 1.179 shares. The number of shares reserved for issuance under the 2005 Directors Stock Plan is 2,000,000. All stock options granted have an exercise price equal to the fair market value price of the Holding Company's common stock on the date of grant, and a maximum term of ten...

  • Page 120
    ... to closed-form models like Black-Scholes, which require single-value assumptions at the time of grant. The expected volatility used in the binomial lattice model is based on an analysis of historical prices of the Company's common stock and options on the Company's shares traded on the open market...

  • Page 121
    ... Company's Board of Directors. Beginning in 2005, no further LTPCP target compensation amounts were set. Instead, certain members of management were awarded Performance Shares under the 2005 Stock Plan. Participants are awarded an initial target number of Performance Shares with the final number...

  • Page 122
    ...(gains) losses included in current year income 156 Amortization of premiums and accretion of discounts associated with investments 199) Income tax effect 16 Allocation of holding gains (losses) on investments relating to other policyholder amounts 1,670 Income tax effect of allocation of holding...

  • Page 123
    ...forward purchase contracts Exercise of stock options Issuance under LTPCP Weighted average common stock outstanding for diluted earnings per common share Income from continuing operations Charge for conversion of company-obligated mandatorily redeemable securities of a subsidiary trust(1 Income...

  • Page 124
    ...-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Auto & Home provides personal lines property and casualty insurance...

  • Page 125
    ...31, 2005 Institutional Individual Auto & Home International Reinsurance (In millions) Corporate & Other Total Premiums Universal life and investment-type product policy fees Net investment income Other revenues Net investment gains (losses Policyholder benefits and claims Interest credited to...

  • Page 126
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For the Year Ended December 31, 2003 Institutional Individual Auto & Home International Reinsurance (In millions) Corporate & Other Total Premiums 9,063 $4,363 $2,908 $1,631 $2,648 $ (38) $20,575 Universal life and investment-type product...

  • Page 127
    ... millions) Fixed maturities Short-term investments Cash and cash equivalents Deferred policy acquisition costs Premiums and other receivables Total assets held-for-sale Future policy benefits Policyholder account balances Other policyholder funds Other liabilities Total liabilities held...

  • Page 128
    ... millions) Equity securities Real estate and real estate joint ventures Short-term investments Other invested assets Cash and cash equivalents Premiums and other receivables Other assets Total assets held-for-sale Short-term debt Current income taxes payable Deferred income taxes payable...

  • Page 129
    ... quoted market prices of comparable investments. Mortgage and Consumer Loans, Mortgage Loan Commitments and Commitments to Fund Partnership Investments Fair values for mortgage and consumer loans are estimated by discounting expected future cash ï¬,ows, using current interest rates for similar loans...

  • Page 130
    ...See Note 4 for derivative fair value disclosures. 21. Subsequent Events On February 21, 2006, the Holding Company's board of directors declared dividends of $0.3432031 per share, for a total of $9 million, on its Series A preferred shares, and $0.4062500 per share, for a total of $24 million, on its...

  • Page 131
    ...Metropolitan Life Insurance Company Member, Public Responsibility Committee BURTON A. DOLE, JR. Vice Chairman of the Board, The Procter & Gamble Company Member, Compensation Committee, Governance Committee and Sales Practices Compliance Committee CHARLES M. LEIGHTON Retired Global Managing Partner...

  • Page 132
    ...Annual Report on Form 10-K may also be accessed at http://ir.metlife.com and at the website of the U.S. Securities and Exchange Commission at http://www.sec.gov. Transfer Agent/Shareholder Records For information or assistance regarding shareholder accounts or dividend checks, please contact MetLife...

  • Page 133
    © 2006 METLIFE, INC. 0511-9421 PEANUTS © United Feature Syndicate, Inc. MetLife, Inc. 200 Park Avenue New York, NY 10166-0188 www.metlife.com