MetLife 2006 Annual Report Download - page 38

Expenses
Total expenses increased by $446 million, or 47%, to $1,386 million for the year ended December 31, 2006 from $940 million for the
comparable 2005 period. The acquisition of Travelers, excluding Travelers financing and integration costs, contributed $59 million during
the first six months of 2006 to the period over period increase. Excluding the impact of Travelers, total expenses increased by $387 million,
or 41%, for the year ended December 31, 2006 from the comparable 2005 period.
The 2006 period included a $35 million contribution to the MetLife Foundation. The 2005 period included a $47 million benefit
associated with a reduction of a previously established liability for settlement death benefits related to the Company’s sales practices class
action settlement recorded in 1999 and a $28 million benefit associated with the reduction of a previously established real estate transfer
tax liability related to Metropolitan Life’s demutualization in 2000. Excluding the impact of these items, total expenses increased by
$277 million for the year ended December 31, 2006 from the comparable 2005 period. This increase was primarily attributable to higher
interest expense of $192 million. The principal reason was a result of the issuance of senior notes in 2005, which included $119 million of
expenses from the financing of the acquisition of Travelers. Additionally, as a result of the issuance of commercial paper, short-term interest
expense increased by $67 million. Corporate support expenses, which included advertising, start-up costs for new products and
information technology costs, were higher by $107 million, partially offset by lower integration costs of $95 million. As a result of growth
in the business and higher interest rates, interest credited to bankholder deposits increased by $85 million at MetLife Bank. Legal-related
costs were higher by $8 million, predominantly from the reduction of previously established liabilities related to legal disputes during the
2005 period. Also included as a component of total expenses were the elimination of intersegment amounts which were offset within total
revenues.
Year ended December 31, 2005 compared with the year ended December 31, 2004 — Corporate & Other
Income (Loss) from Continuing Operations
Income (loss) from continuing operations increased by $67 million, or 82%, to ($15) million for the year ended December 31, 2005 from
($82) million for the comparable 2004 period. The acquisition of Travelers, excluding Travelers financing and integration costs incurred by
the Company, contributed $88 million of this increase which included $1 million, net of income tax, of net investment losses. Excluding the
impact of Travelers, income from continuing operations decreased by $21 million for the year ended December 31, 2005 from the
comparable 2004 period. Included in this decrease were lower investment losses of $69 million, net of income tax. Excluding the impact of
Travelers and the decrease of net investment losses, income (loss) from continuing operations decreased by $90 million.
The 2005 period includes a $30 million benefit, net of income tax, associated with the reduction of a previously established liability for
settlement death benefits related to the Company’s sales practices class action settlement recorded in 1999, and an $18 million benefit,
net of income tax, associated with the reduction of a previously established real estate transfer tax liability related to Metropolitan Life’s
demutualization in 2000. The 2004 period includes a $105 million benefit associated with the resolution of issues relating to the Internal
Revenue Service’s audit of Metropolitan Life and its subsidiaries’ tax returns for the years 1997-1999. Also included in the 2004 period was
an expense related to a $32 million, net of income tax, contribution to the MetLife Foundation. Excluding the impact of these items, income
from continuing operations decreased by $65 million for the year ended December 31, 2005 from the comparable 2004 period. The
decrease was primarily attributable to higher interest expense on debt (principally associated with the issuance of debt to finance the
Travelers acquisition), integration costs associated with the acquisition of Travelers, interest credited to bank holder deposits and legal-
related liabilities of $119 million, $76 million, $44 million and $4 million, respectively, all of which were net of income tax. This was partially
offset by an increase in net investment income of $107 million, and a decrease in corporate support expenses of $10 million, both of which
were net of income tax. Tax benefits increased by $61 million over the comparable 2004 period due to the difference of finalizing the
Company’s 2004 tax return in 2005 when compared to finalizing the Company’s 2003 tax return in 2004 and the difference between the
actual and the estimated tax rate allocated to the various segments.
Revenues
Total revenues, excluding net investment gains (losses), increased by $376 million, or 97%, to $762 million for the year ended
December 31, 2005 from $386 million for the comparable 2004 period. The acquisition of Travelers contributed $152 million to the period
over period increase. Excluding the impact of Travelers, the increase of $224 million was primarily attributable to increases in income on
fixed maturity securities due to improved yields from lengthening of the duration and a higher asset base, as well as increased income from
other limited partnerships and mortgage loans on real estate. Also included as a component of total revenues were the intersegment
eliminations which were offset within total expenses.
Expenses
Total expenses increased by $330 million, or 54%, to $940 million for the year ended December 31, 2005 from $610 million for the
comparable 2004 period. The acquisition of Travelers, excluding Travelers financing and integration costs, contributed $15 million to the
period over period increase. Excluding the impact of Travelers, total expenses increased by $315 million for the year ended December 31,
2005 from the comparable 2004 period.
The 2005 period includes a $47 million benefit associated with a reduction of a previously established liability for settlement death
benefits related to the Company’s sales practices class action settlement recorded in 1999, a $28 million benefit associated with the
reduction of a previously established real estate transfer tax liability related to Metropolitan Life’s demutualization in 2000. The 2004 period
includes a $50 million contribution to the MetLife Foundation, partially offset by a $22 million reduction of a liability associated with the
resolution of all issues relating to the Internal Revenue Service’s audit of Metropolitan Life and its subsidiaries’ tax returns for the years
1997-1999. Excluding the impact of these items, total expenses increased by $418 million for the year ended December 31, 2005 from the
comparable 2004 period. This increase was attributable to higher interest expense of $187 million as a result of the issuance of senior
notes in 2004 and 2005, which included $129 million of expenses from the financing of the acquisition of Travelers. Integration costs
associated with the acquisition of Travelers were $120 million. As a result of growth in the business, interest credited to bank holder
deposits increased by $70 million at MetLife Bank. In addition, legal-related liabilities increased by $5 million. These increases were offset
by a reduction in corporate support expenses of $16 million. Also included as a component of total expenses was the elimination of
intersegment amounts which was offset within total revenues.
35MetLife, Inc.