MetLife 2005 Annual Report Download - page 31

Investors Insurance Company of California. In addition, General American has entered into a contingent reinsurance agreement with MetLife Investors.
Under this agreement, in the event that MetLife Investors’ statutory capital and surplus is less than $10 million or total adjusted capital falls below 180% of
the company action level RBC, as defined by state insurance statutes, General American would assume as assumption reinsurance, subject to
regulatory approvals and required consents, all of MetLife Investors’ life insurance policies and annuity contract liabilities. At December 31, 2005, the
capital and surplus of MetLife Investors was in excess of the minimum capital and surplus amount referenced above, and its total adjusted capital was in
excess of the most recent referenced RBC-based amount calculated at December 31, 2005.
In connection with the acquisition of Travelers, MetLife International Holdings, Inc. (‘‘MIH’’), a subsidiary of the Holding Company, committed to the
Australian Prudential Regulatory Authority that it will provide or procure the provision of additional capital to MetLife General Insurance Limited (‘‘MGIL’’), an
Australian subsidiary of MIH, to the extent necessary to enable MGIL to meet insurance capital adequacy and solvency requirements. In addition, MetLife
International Insurance, Ltd. (‘‘MIIL’’), a Bermuda insurance company, was acquired as part of the Travelers transaction. In connection with the assumption
of a block of business by MIIL from a company in liquidation in 1995, Citicorp Life Insurance Company (‘‘CLIC’’), an affiliate of MIIL and a subsidiary of the
Holding Company, agreed with MIIL and the liquidator to make capital contributions to MIIL to ensure that, for so long as any policies in such block remain
outstanding, MIIL remains solvent and able to honor the liabilities under such policies.
Management does not anticipate that these arrangements will place any significant demands upon the Company’s liquidity resources.
Litigation. Various litigation, including purported or certified class actions, and various claims and assessments against the Company, in addition to
those discussed elsewhere herein and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the
Company’s business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer.
Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the
Company’s compliance with applicable insurance and other laws and regulations.
It is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of
potential losses except as noted elsewhere herein in connection with specific matters. In some of the matters referred to herein, very large and/or
indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations, it is possible that an adverse
outcome in certain cases could have a material adverse effect upon the Company’s consolidated financial position, based on information currently known
by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect.
However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that
an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated net income or cash flows
in particular quarterly or annual periods.
Other. Based on management’s analysis of its expected cash inflows from operating activities, the dividends it receives from subsidiaries, including
Metropolitan Life, that are permitted to be paid without prior insurance regulatory approval and its portfolio of liquid assets and other anticipated cash
flows, management believes there will be sufficient liquidity to enable the Company to make payments on debt, make cash dividend payments on its
common stock, pay all operating expenses, and meet its cash needs. The nature of the Company’s diverse product portfolio and customer base lessens
the likelihood that normal operations will result in any significant strain on liquidity.
Consolidated cash flows. Net cash provided by operating activities was $8,005 million and $6,510 million for the years ended December 31, 2005
and 2004, respectively. The $1,495 million increase in operating cash flows 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 activities was $6,510 million and $6,127 million for the years ended December 31, 2004 and 2003, respectively.
The $383 million increase in operating cash flows in 2004 over the comparable 2003 period is primarily attributable to continued growth in the group life,
long-term care, dental and disability businesses, as well as an increase in retirement & savings’ structured settlements due to a large multi-contract sale
in 2004. Also, the late 2003 acquisition of John Hancock’s group TIAA/CREF’s long-term care business contributed to growth in the 2004 period.
Net cash used in investing activities was $22,610 million and $14,417 million for the years ended December 31, 2005 and 2004, respectively. The
$8,193 million increase in net cash used in investing activities in 2005 over the comparable 2004 period is primarily due to the acquisition of Travelers
and CitiStreet Associates, the increase in net purchases of fixed maturities and an increase in the origination of mortgage and consumer loans, primarily in
commercial loans, as compared to the 2004 period. This was partially offset by an increase in repayments of mortgage and consumer loans, an increase
in sales of equity real estate and a decrease in the cash used for short-term investments. In addition, the 2005 period includes proceeds associated with
the sale of SSRM and MetLife Indonesia.
Net cash used in investing activities was $14,417 million and $26,878 million for the years ended December 31, 2004 and 2003, respectively. The
$12,461 million decrease in net cash used in investing activities in 2004 over the comparable 2003 period is primarily due to less cash provided by
financing activities, partially offset by an increase in cash generated from operations. This decrease in available cash resulted in reduced investments in
fixed maturities in 2004 as compared to 2003. These items are partially offset by an increase in mortgage and other loan origination as the Company
continues to take advantage of favorable market conditions in this sector, as well as an increase in cash used for equity securities and short-term
investments for the comparable periods.
Net cash provided by financing activities was $14,517 million and $8,280 million for the years ended December 31, 2005 and 2004, respectively.
The $6,237 million increase in net cash provided by financing activities in 2005 over the comparable 2004 period is primarily attributable to the Holding
Company’s funding of the acquisition of Travelers through the issuance of long-term debt, junior subordinated debt securities and preferred shares. In
addition, there was an increase in the amount of securities lending cash collateral invested in connection with the program. This increase was partially
offset by a decrease in net cash provided by policyholder account balances, the repayment of previously issued long-term debt, the payment of common
stock dividends, the payment of dividends on the preferred shares, the payment of debt and equity issuance costs, and the repurchase of its common
stock by RGA.
Net cash provided by financing activities was $8,280 million and $22,161 million for the years ended December 31, 2004 and 2003, respectively.
The $13,881 million decrease in net cash provided by financing activities in 2004 over the comparable 2003 period is primarily due to a decrease in
securities lending cash collateral invested in connection with the program. In addition, there were repayments of short-term debt associated with dollar roll
activity, and an increase in cash used in the Company’s stock repurchase program. Net cash provided by policyholder account balances decreased
MetLife, Inc.
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