MetLife 2006 Annual Report Download - page 8

Management’s Discussion and Analysis of Financial Condition and Results of Operations
For purposes of this discussion, “MetLife” or the “Company” refers to MetLife, Inc., a Delaware corporation incorporated in 1999 (the
“Holding Company”), and its subsidiaries, including Metropolitan Life Insurance Company (“Metropolitan Life”). Following this summary is a
discussion addressing the consolidated results of operations and financial condition of the Company for the periods indicated. This
discussion should be read in conjunction with the forward-looking statement information included below, “Risk Factors” contained in
MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006, “Selected Financial Data” and the Company’s
consolidated financial statements included elsewhere herein.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements which constitute
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to
trends in the operations and financial results and the business and the products of MetLife, Inc. and its subsidiaries, as well as other
statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. Forward-
looking statements are made based upon management’s current expectations and beliefs concerning future developments and their
potential effects on the Company. Such forward-looking statements are not guarantees of future performance.
Actual results may differ materially from those included in the forward-looking statements as a result of risks and uncertainties including,
but not limited to, the following: (i) changes in general economic conditions, including the performance of financial markets and interest
rates; (ii) heightened competition, including with respect to pricing, entry of new competitors, the development of new products by new
and existing competitors and for personnel; (iii) investment losses and defaults; (iv) unanticipated changes in industry trends; (v) catas-
trophe losses; (vi) ineffectiveness of risk management policies and procedures; (vii) changes in accounting standards, practices and/or
policies; (viii) changes in assumptions related to deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”) or goodwill;
(ix) discrepancies between actual claims experience and assumptions used in setting prices for the Company’s products and establishing
the liabilities for the Company’s obligations for future policy benefits and claims; (x) discrepancies between actual experience and
assumptions used in establishing liabilities related to other contingencies or obligations; (xi) adverse results or other consequences from
litigation, arbitration or regulatory investigations; (xii) downgrades in the Company’s and its affiliates’ claims paying ability, financial strength
or credit ratings; (xiii) regulatory, legislative or tax changes that may affect the cost of, or demand for, the Company’s products or services;
(xiv) MetLife, Inc.’s primary reliance, as a holding company, on dividends from its subsidiaries to meet debt payment obligations and the
applicable regulatory restrictions on the ability of the subsidiaries to pay such dividends; (xv) deterioration in the experience of the “closed
block” established in connection with the reorganization of Metropolitan Life; (xvi) economic, political, currency and other risks relating to
the Company’s international operations; (xvii) the effects of businessdisruptionoreconomiccontractionduetoterrorismorother
hostilities; (xviii) the Company’s ability to identify and consummate on successful terms any future acquisitions, and to successfully
integrate acquired businesses with minimal disruption; and (xix) other risks and uncertainties described from time to time in MetLife, Inc.’s
filings with the U.S. Securities and Exchange Commission (“SEC”).
The Company specifically disclaims any obligation to update or revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Executive Summary
MetLife is a leading provider of insurance and other financial services with operations throughout the United States and the regions of
Latin America, Europe, and Asia Pacific. Through its domestic and international subsidiaries and affiliates, MetLife, Inc. offers life insurance,
annuities, automobile and homeowners insurance, retail banking and other financial services to individuals, as well as group insurance,
reinsurance and retirement & savings products and services to corporations and other institutions. MetLife is organized into five operating
segments: Institutional, Individual, Auto & Home, International and Reinsurance, as well as Corporate & Other.
The management’s discussion and analysis which follows isolates, in order to be meaningful, the results of the Travelers acquisition in
the period over period comparison as the Travelers acquisition was not included in the results of the Company until July 1, 2005. The
Travelers’ amounts which have been isolated represent the results of the Travelers legal entities which have been acquired. These amounts
represent the impact of the Travelers acquisition; however, as business currently transacted through the acquired Travelers legal entities is
transitioned to legal entities already owned by the Company, some of which has already occurred, the identification of the Travelers legal
entity business will not necessarily be indicative of the impact of the Travelers acquisition on the results of the Company.
As a part of the Travelers acquisition, management realigned certain products and services within several of the Company’s segments
to better conform to the way it manages and assesses its business. Accordingly, all prior period segment results have been adjusted to
reflect such product reclassifications. Also in connection with the Travelers acquisition, management has utilized its economic capital
model to evaluate the deployment of capital based upon the unique and specific nature of the risks inherent in the Company’s existing and
newly acquired businesses and has adjusted such allocations based upon this model.
Year ended December 31, 2006 compared with the year ended December 31, 2005
The Company reported $6,159 million in net income available to common shareholders and diluted earnings per common share of
$7.99 for the year ended December 31, 2006 compared to $4,651 million in net income available to common shareholders and diluted
earnings per common share of $6.16 for the year ended December 31, 2005. Excluding the acquisition of Travelers, which contributed
$317 million during the first six months of 2006 to the year over year increase, net income available to common shareholders increased by
$1,191 million for the year ended December 31, 2006 compared to the 2005 period.
Income from discontinued operations consisted of net investment income and net investment gains related to real estate properties that
the Company had classified as available-for-sale or had sold and, for the years ended December 31, 2006 and 2005, the operations and
gain upon disposal from the sale of SSRM Holdings, Inc. (“SSRM”) on January 31, 2005 and for the year ended December 31, 2005, the
operations of P.T. Sejahtera (“MetLife Indonesia”) which was sold on September 29, 2005. Income from discontinued operations, net of
income tax, increased by $1,552 million, or 95%, to $3,188 million for the year ended December 31, 2006 from $1,636 million for the
comparable 2005 period. This increase is primarily due to a gain of $3 billion, net of income tax, on the sale of the Peter Cooper Village and
Stuyvesant Town properties in Manhattan, New York, as well as a gain of $32 million, net of income tax, related to the sale of SSRM during
the year ended December 31, 2006. This increase was partially offset by gains during the year ended December 31, 2005 including
$1,193 million, net of income tax, on the sales of the One Madison Avenue and 200 Park Avenue properties in Manhattan, New York, as
5MetLife, Inc.