MetLife 2006 Annual Report Download - page 32

Ireland reduced net income by $34 million in the current year. A valuation allowance was established against the deferred tax benefit
resulting from the Ireland losses.
Partially offsetting these decreases was an increase in South Korea’s income from continuing operations of $79 million, net of income
tax, primarily due to continued growth of the in-force business, a one-time benefit of $38 million, net of income tax, associated with the
implementation of a more refined reserve valuation system, as well as a benefit of $13 million from the impact of foreign currency exchange
rates. Argentina’s income from continuing operations increased by $61 million, net of income tax, due to higher net investment income
resulting from capital contributions since the completion of the Travelers acquisition, 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 $4 million of net operating losses for which a valuation allowance had been previously established, a
$12 million increase in the prior year period of a deferred tax valuation allowance established against tax benefits in that year, as well as
business growth. Australia’s income from continuing operations increased by $17 million, net of income tax, primarily due to reserve
strengthening on a block of business in the prior year, as well as business growth. Income from continuing operations increased in Chile by
$5 million primarily due to growth in the institutional business of $2 million, as well as the favorable impact of foreign currency exchange
rates of $2 million, and in the United Kingdom by $5 million primarily due to growth of the in-force business. In addition, income from
continuing operations increased by $13 million, net of income tax, due to a reduction in the amount charged for economic capital.
The remainder of the decrease in income from continuing operations can be attributed to other countries. Changes in foreign currency
exchange rates accounted for $2 million of the increase in income from continuing operations.
Revenues
Total revenues, excluding net investment gains (losses), increased by $975 million, or 27%, to $4,604 million for the year ended
December 31, 2006 from $3,629 million for the comparable 2005 period. The acquisition of Travelers contributed $413 million during the
first six months of 2006 to the period over period increase. Excluding the impact of Travelers, such revenues increased by $562 million, or
15%, over the comparable 2005 period.
Premiums, fees and other revenues increased by $469 million, or 17%, to $3,254 million for the year ended December 31, 2006 from
$2,785 million for the comparable 2005 period. Mexico’s premiums, fees and other revenues increased by $159 million, primarily due to
higher fees and growth in its universal life and institutional business, partially offset by an adjustment for experience refunds on a block of
business and various one-time other revenue items for which the prior year benefited by $19 million and the current year benefited by
$16 million. South Korea’s premiums, fees and other revenues increased by $156 million primarily due to business growth driven by strong
sales of its variable universal life product, as well as the favorable impact of foreign currency exchange rates of $56 million. Premiums, fees
and other revenues increased in Brazil by $49 million due to business growth and higher bancassurance business, as well as an increase in
amounts retained under reinsurance arrangements. Chile’s premiums, fees and other revenues increased by $22 million primarily due to
the favorable impact of foreign currency exchange rates of $14 million, as well as an increase in institutional premiums through its bank
distribution channel, partially offset by lower annuity sales due in part from management’s decision not to match aggressive pricing in the
marketplace. Premiums, fees and other revenues increased in the United Kingdom, Argentina, Australia, and Taiwan by $21 million,
$16 million, $15 million, and $12 million respectively, primarily due to business growth. Increases in other countries accounted for the
remainder of the change.
Net investment income increased by $93 million, or 11%, to $937 million for the year ended December 31, 2006 from $844 million for
the comparable 2005 period. Net investment income increased in Argentina by $41 million primarily due to higher invested assets resulting
from capital contributions since the completion of the Travelers acquisition. Net investment income in Mexico increased by $28 million
primarily due to higher inflation rates and increases in invested assets, partially offset by lower average investment yields. Net investment
income in Chile decreased by $8 million primarily due to a reduction in the inflation rate, partially offset by the favorable impact of foreign
currency exchange rates of $8 million and increases in invested assets. The invested asset valuations and returns on these invested assets
are linked to inflation rates in most of the Latin American countries in which the Company does business. South Korea, Brazil and Taiwan’s
net investment income increased by $25 million, $14 million and $5 million, respectively, primarily due to increases in invested assets, as
well as the favorable impact of foreign currency exchange rates of $10 million. Net investment income in the home office increased by
$17 million primarily due to a reduction in the amount charged for economic capital from the prior year. These increases in net investment
income were partially offset by a decrease of $33 million in Canada due to the realignment of economic capital. Increases in other countries
accounted for the remainder of the change.
Changes in foreign currency exchange rates had a favorable impact of $105 million on total revenues, excluding net investment gains
(losses).
Expenses
Total expenses increased by $905 million, or 27%, to $4,316 million for the year ended December 31, 2006 from $3,411 million for the
comparable 2005 period. The acquisition of Travelers contributed $388 million during the first six months of 2006 to the year over year
increase. Excluding the impact of Travelers, total expenses increased by $517 million, or 15%, over the comparable 2005 period.
Policyholder benefits and claims, policyholder dividends and interest credited to PABs increased by $186 million, or 8%, to
$2,597 million for the year ended December 31, 2006 from $2,411 million for the comparable 2005 period. Policyholder benefits and
claims, policyholder dividends and interest credited to PABs in Mexico increased by $113 million primarily due to an increase in other
policyholder benefits and claims of $108 million and in interest credited to PABs of $39 million commensurate with the growth in revenue
discussed above. These increases in Mexico were partially offset by a decrease in certain policyholder liabilities of $18 million caused by a
decrease in the unrealized investment gains on the invested assets supporting those liabilities, a $10 million benefit from a decrease in
policyholder benefits associated with a large group policy that was not renewed by the policyholder, and a $6 million benefit in the current
year from the elimination of liabilities for pending claims that were determined to be invalid following a review. Brazil’s policyholder benefits
and claims increased by $49 million primarily due to an increase in policyholder liabilities on these specific blocks of business as discussed
above, an increase in amounts retained under reinsurance arrangements, as well as adverse claim experience in other lines of business.
South Korea’s policyholder benefits and claims, policyholder dividends and interest credited to PABs increased by $44 million commen-
surate with the business growth discussed above, as well as the impact of foreign currency exchange rates of $33 million. These increases
were partially offset by a decrease in policyholder benefits and claims, policyholder dividends, and interest credited to PABs in Australia of
29MetLife, Inc.