MetLife 2006 Annual Report Download - page 16

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law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to
pursue claims against the Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and
the impact of any possible future adverse verdicts and their amounts. On a quarterly and annual basis the Company reviews relevant
information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the
Company’s consolidated financial statements. It is possible that an adverse outcome in certain of the Company’s litigation and regulatory
investigations, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could have
a material effect upon the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Economic Capital
Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide
a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in
MetLife’s businesses. As a part of the economic capital process, a portion of net investment income is credited to the segments based on
the level of allocated equity. This is in contrast to the standardized regulatory risk-based capital (“RBC”) formula, which is not as refined in
its risk calculations with respect to the nuances of the Company’s businesses.
Results of Operations
Discussion of Results
The following table presents consolidated financial information for the Company for the years indicated:
2006 2005 2004
Years Ended December 31,
(In millions)
Revenues
Premiums.................................................. $26,412 $24,860 $22,200
Universallifeandinvestment-typeproductpolicyfees..................... 4,780 3,828 2,867
Netinvestmentincome......................................... 17,192 14,817 12,272
Otherrevenues.............................................. 1,362 1,271 1,198
Netinvestmentgains(losses)..................................... (1,350) (93) 175
Totalrevenues .......................................... 48,396 44,683 38,712
Expenses
Policyholderbenefitsandclaims................................... 26,431 25,506 22,662
Interest credited to policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . 5,246 3,925 2,997
Policyholderdividends ......................................... 1,701 1,679 1,666
Otherexpenses.............................................. 10,797 9,267 7,813
Totalexpenses.......................................... 44,175 40,377 35,138
Income from continuing operations before provision for income tax. . . . . . . . . . . . . 4,221 4,306 3,574
Provisionforincometax ........................................ 1,116 1,228 996
Incomefromcontinuingoperations ................................. 3,105 3,078 2,578
Income (loss) from discontinued operations, net of income tax . . . . . . . . . . . . . . . 3,188 1,636 266
Income before cumulative effect of a change in accounting, net of income tax . . . . . 6,293 4,714 2,844
Cumulative effect of a change in accounting, net of income tax . . . . . . . . . . . . . . . — — (86)
Netincome ................................................ 6,293 4,714 2,758
Preferredstockdividends ....................................... 134 63 —
Netincomeavailabletocommonshareholders.......................... $ 6,159 $ 4,651 $ 2,758
Year ended December 31, 2006 compared with the year ended December 31, 2005 — The Company
Income from Continuing Operations
Income from continuing operations increased by $27 million, or 1%, to $3,105 million for the year ended December 31, 2006 from
$3,078 million for the comparable 2005 period. Excluding the acquisition of Travelers, which contributed $317 million during the first six
months of 2006 to the year over year increase, income from continuing operations decreased by $290 million. Income from continuing
operations for the years ended December 31, 2006 and 2005 included the impact of certain transactions or events, the timing, nature and
amount of which are generally unpredictable. These transactions are described in each applicable segment’s discussion. These items
contributed a charge of $23 million, net of income tax, to the year ended December 31, 2006. These items contributed a benefit of
$48 million, net of income tax, to the year ended December 31, 2005. Excluding the impact of these items and the acquisition of Travelers,
income from continuing operations decreased by $219 million for the year ended December 31, 2006 compared to the prior 2005 period.
13MetLife, Inc.