MetLife 2006 Annual Report Download - page 22

resulted from changes in the value of the dollar versus major foreign currencies, including the euro and pound sterling, and changes in
U.S. interest rates during the year ended December 31, 2005.
Net Income
Income tax expense for the year ended December 31, 2005 is $1,228 million, or 29% of income from continuing operations before
provision for income tax, compared with $996 million, or 28%, for the comparable 2004 period. The current period includes $80 million of
income tax expense related to the acquisition of Travelers. Excluding the acquisition of Travelers, income tax expense for the year ended
December 31, 2005 is $1,148 million, or 29% of income from continuing operations before provision for income tax, compared with
$996 million, or 28%, for the comparable 2004 period. The 2005 effective tax rate differs from the corporate tax rate of 35% primarily due to
the impact of non-taxable investment income and tax credits for investments in low income housing. In addition, the 2005 effective tax rate
reflects a tax benefit of $27 million related to the repatriation of foreign earnings pursuant to Internal Revenue Code Section 965 for which a
U.S. deferred tax provision had previously been recorded and an adjustment of a benefit of $31 million consisting primarily of a revision in
the estimate of income tax for 2004 had been made. The 2004 effective tax rate differs from the corporate tax rate of 35% primarily due to
the impact of non-taxable investment income, tax credits for investments in low income housing, a decrease in the deferred tax valuation
allowance to recognize the effect of certain foreign net operating loss carryforwards in South Korea, and the contribution of appreciated
stock to the MetLife Foundation. In addition, the 2004 effective tax rate reflects an adjustment for the resolution of all issues relating to the
Internal Revenue Service’s audit of Metropolitan Life’s and its subsidiaries’ tax returns for the years 1997-1999 of $91 million and an
adjustment of a benefit of $9 million consisting primarily of a revision in the estimate of income tax for 2003.
Income from discontinued operations is comprised of the operations and the gain upon disposal from the sale of MetLife Indonesia on
September 29, 2005 and SSRM on January 31, 2005, as well as net investment income and net investment gains related to real estate
properties that the Company has classified as available-for-sale or has sold. Income from discontinued operations, net of income tax,
increased by $1,370 million to $1,636 million for the year ended December 31, 2005 from $266 million for the comparable 2004 period.
This increase is primarily due to a gain of $1,193 million, net of income tax, on the sales of the One Madison Avenue and 200 Park Avenue
properties in Manhattan, New York, and the gains on the sales of SSRM and MetLife Indonesia of $177 million and $10 million, respectively,
both net of income tax, in the year ended December 31, 2005. Partially offsetting this increase is the gain on the sale of the Sears Tower
property of $85 million, net of income tax, in the year ended December 31, 2004.
During the year ended December 31, 2004, the Company recorded an $86 million charge, net of income tax, for a cumulative effect of a
change in accounting principle in accordance with SOP 03-1, which provides guidance on (i) the classification and valuation of long-
duration contract liabilities; (ii) the accounting for sales inducements; and (iii) separate account presentation and valuation. This charge is
primarily related to those long-duration contract liabilities where the amount of the liability is indexed to the performance of a target portfolio
of investment securities.
In addition, during the second half of the year ended December 31, 2005, the Holding Company paid $63 million in dividends on its
Preferred Shares issued in connection with financing the acquisition of Travelers.
19MetLife, Inc.