MetLife 2006 Annual Report Download - page 43

Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest
and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial
withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent
events as appropriate to the respective product type. Such estimated cash payments are also presented net of estimated future
premiums on policies currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies,
cash payments have been estimated using current spot rates.
The sum of the estimated cash flows shown for all years in the table of $176.1 billion exceeds the liability amount of $133.5 billion
included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the
difference, as well as differences in assumptions between the date the liabilities were initially established and the current date.
See also comments under footnote 1 regarding the source and uncertainties associated with the estimation of the contractual
obligations related to future policyholder benefits and policyholder account balances.
(3) Other policyholder liabilities is comprised of other policyholder funds, policyholder dividends payable and the policyholder dividend
obligation. Amounts included in the table above related to these liabilities are as follows:
(a) Other policyholder funds includes liabilities for incurred but not reported claims and claims payable on group term life, long-term
disability, LTC, and dental; policyholder dividends left on deposit and policyholder dividends due and unpaid related primarily to
traditional life and group life and health; premiums received in advance. Liabilities related to unearned revenue of approximately
$1.6 billion have been excluded from the cash payments presented in the table above because they reflect an accounting
convention and not a contractual obligation. With the exception of policyholder dividends left on deposit, and those items excluded
as noted in the preceding sentence, the contractual obligation presented in the table above related to other policyholder funds is
equal to the liability reflected in the consolidated balance sheet. Such amounts are reported in the one year or less category due to
the short-term nature of the liabilities. Contractual obligations on policyholder dividends left on deposit are projected based on
assumptions of policyholder withdrawal activity.
(b) Policyholder dividends payable consists of liabilities related to dividends payable in the following calendar year on participating
policies. As such, the contractual obligation related to policyholder dividends payable is presented in the table above in the less
than one year category at the amount of the liability presented in the consolidated balance sheet.
(c) The nature of the policyholder dividend obligation is described in Note 9 to the Consolidated Financial Statements. Because the
exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the
policyholder dividend obligation is based upon a long-term projection of the performance of the closed block, management has
reflected the obligation at the amount of the liability presented in the consolidated balance sheet in the more than five years
category. This was done to reflect the long-duration of the liability and the uncertainty of the ultimate cash payment.
(4) Amounts presented in the table above for short-term debt, long-term debt, junior subordinated debt securities and shares subject to
mandatory redemption differ from the balances presented on the consolidated balance sheet as the amounts presented in the table
above do not include premiums or discounts upon issuance or purchase accounting fair value adjustments. The amounts presented
above also include interest on such obligations as described below.
Short-term debt consists principally of 90-day commercial paper, with a remaining maturity of approximately 17 days, and carries a
variable rate of interest. The contractual obligation for short-term debt presented in the table above represents the amounts due upon
maturity of the commercial paper plus the related variable interest which is calculated using the prevailing rates at December 31, 2006
through the date of maturity without consideration of any further issuances of commercial paper upon maturity of the amounts
outstanding at December 31, 2006.
Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was
computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at
December 31, 2006 and, as such, does not consider the impact of future rate movements.
Junior subordinated debt bears interest at fixed interest rates through their respective redemption dates. Interest was computed using
the stated rate on the obligation through the scheduled redemption date as it is the Company’s expectation that the debt will be
redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity date would increase the
contractual obligation by $4.5 billion.
Shares subject to mandatory redemption bears interest at fixed interest rates through their respective mandatory redemptions dates.
Interest on shares subject to mandatory redemption was computed using the stated fixed rate on the obligation through maturity.
Long-term debt also includes payments under capital lease obligations of $11 million, $24 million, $3 million and $24 million, in the less
than one year, one to three years, three to five years and more than five years categories, respectively.
(5) The Company has accepted cash collateral in connection with securities lending and derivative transactions. As the securities lending
transaction expire within the next year or the timing of the return of the collateral is uncertain, the return of the collateral has been
included in the less than one year category in the table above. The Company also holds non-cash collateral, which is not reflected as a
liability in the consolidated balance sheet, of $453 million as of December 31, 2006.
(6) The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities and bridge loans. In the table above, the
timing of the funding of mortgage loans is based on the expiration date of the commitment. As it relates to commitments to lend funds to
partnerships and under bank credit facilities, the Company anticipates that these amounts could be invested any time over the next five
years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are presented in the less than one
year category in the table above. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the
less than one year category in the table above. See “— Off-Balance Sheet Arrangements.”
(7) As a lessee, the Company has various operating leases, primarily for office space. Contractual provisions exist that could increase or
accelerate those leases obligations presented, including various leases with early buyouts and/or escalation clauses. However, the
impact of any such transactions would not be material to the Company’s financial positions or results of operations. See “— Off-
Balance Sheet Arrangements.”
(8) Other includes those other liability balances which represent contractual obligations as well as other miscellaneous contractual
obligations of $67 million not included elsewhere in the table above.
40 MetLife, Inc.