MetLife 2006 Annual Report Download - page 17

The following table provides the change in income from continuing operations by segment, excluding Travelers, and certain transactions
as mentioned above:
$ Change % Change
(In millions)
Institutional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(318) (145)%
Individual........................................................ (68) (31)
Corporate&Other .................................................. (26) (12)
International ...................................................... (25) (12)
Auto&Home ..................................................... 192 88
Reinsurance...................................................... 26 12
Total change, net of income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(219) (100)%
The Institutional segment’s income from continuing operations decreased primarily due to an increase in net investment losses, a
decline in interest margins, an increase in operating expenses, which included a charge associated with costs related to the sale of certain
small market recordkeeping businesses, a charge associated with non-deferrable LTC commissions expense and a charge associated with
costs related to a previously announced regulatory settlement, partially offset by the impact of integration costs in the prior year and
favorable underwriting results.
The Individual segment’s income from continuing operations decreased as a result of an increase in net investment losses, a decline in
interest margins, higher expenses and annuity benefits, as well as increases in interest credited to policyholder account balances (“PABs”)
and policyholder dividends. These decreases were partially offset by increased fee income related to the growth in separate account
products, favorable underwriting results in life products, lower DAC amortization and a decrease in the closed block-related policyholder
dividend obligation.
Income from continuing operations in Corporate & Other decreased primarily due to higher investment losses, higher interest expense
on debt, corporate support expenses, interest credited to bankholder deposits and legal-related costs, partially offset by an increase in tax
benefits, an increase in net investment income, lower integration costs and an increase in other revenues.
The decrease in income from continuing operations in the International segment was primarily the result of a decrease in Taiwan due to a
loss recognition adjustment and a restructuring charge, partially offset by reserve refinements associated with the implementation of a new
valuation system. Income from continuing operations decreased in Canada primarily due to the realignment of economic capital in the prior
year. Income from continuing operations in Mexico decreased primarily due to an increase in amortization of DAC, higher operating
expenses, the net impact of an adjustment to the liability for experience refunds on a block of business, a decrease in various one-time
other revenue items in both periods, as well as an increase in income tax expense due to a tax benefit realized in the prior year. These
decreases in Mexico were partially offset by a decrease in certain policyholder liabilities caused by a decrease in unrealized investment
gains on invested assets supporting those liabilities relative to the prior year, a decrease in policyholder benefits associated with a large
group policy that was not renewed by the policyholder, a benefit in the current year from the release of liabilities for pending claims that
were determined to be invalid following a review, and the unfavorable impact in the prior year of contingent liabilities. In addition, a decrease
in Brazil was primarily due to an increase in policyholder benefits and claims related to an increase in future policyholder benefit liabilities on
specific blocks of business and an increase in litigation liabilities, as well as adverse claim experience in the current year. The home office
recorded higher infrastructure expenditures in support of segment growth, as well as a contingent tax liability. Results of the Company’s
investment in Japan decreased primarily due to variability in the hedging program. In addition, expenses related to the Company’s start-up
operations in Ireland reduced income from continuing operations. A valuation allowance was established against the deferred tax benefit
resulting from the Ireland losses. Partially offsetting these decreases in income from continuing operations were increases in Chile and the
United Kingdom due to continued growth of the in-force business, as well as an increase in Australia due to reserve strengthening on a
block of business in the prior year. South Korea’s income from continuing operations increased due to growth in the in-force business and
the implementation of a more refined reserve valuation system. Higher net investment income resulting from capital contributions, the
release of liabilities for pending claims that were determined to be invalid following a review, the favorable impact of foreign currency
exchange rates and inflation rates on certain contingent liabilities, the utilization of net operating losses for which a valuation allowance had
been previously established, and an increase in the prior year period of a deferred income tax valuation allowance, as well as business
growth, increased income from continuing operations in Argentina. Changes in foreign currency exchange rates also contributed to the
increase.
Partially offsetting the decreases in income from continuing operations was an increase in the Auto & Home segment primarily due to a
loss in the third quarter of 2005 related to Hurricane Katrina, favorable development of prior year loss reserves, improvement in non-
catastrophe loss experience and a reduction in loss adjustment expenses. These increases were partially offset by higher catastrophe
losses, excluding Hurricanes Katrina and Wilma, in the current year period, and decreases in net earned premiums, other revenues, and
net investment income, as well as an increase in other expenses.
Income from continuing operations in the Reinsurance segment increased primarily due to added business in-force from facultative and
automatic treaties and renewal premiums on existing blocks of business in the U.S. and international operations, an increase in net
investmentincomeduetogrowthintheinvestedassetbaseandanincrease in other revenues. These items were partially offset by
unfavorable mortality experience, an increase in liabilities associated with Reinsurance Group of America, Incorporated’s (“RGA”) Argentine
pension business in the prior period and an increase in other expenses, primarily related to expenses associated with DAC, interest
expense, minority interest expense and equity compensation costs.
14 MetLife, Inc.