MetLife 2007 Annual Report Download - page 30

increase. Excluding the impact of the Travelers acquisition, total expenses increased $1,065 million, or 6%, from the comparable 2005
period.
The increase in expenses was attributable to higher interest credited to policyholder account balances of $621 million, policyholder
benefits and claims of $366 million and operating expenses of $79 million.
Management attributes the increase of $621 million in interest credited to policyholder account balances to $433 million from an
increase in average crediting rates, which was largely due to the impact of higher short-term rates in the current year period and
$188 million solely from growth in the average policyholder account balances, primarily resulting from GICs within the retirement & savings
business.
The increases in policyholder benefits and claims of $366 million included a $27 million increase related to net investment gains
(losses). Excluding the increase related to net investment gains (losses), policyholder benefits and claims increased by $339 million. Non-
medical health & other’s policyholder benefits and claims increased by $306 million, predominantly due to the aforementioned growth in
business, as well as unfavorable morbidity in disability and unfavorable claim experience in AD&D. Partially offsetting these increases was
favorable claim and morbidity experience in IDI, as well as the impact of an establishment of a $25 million liability for future losses in the
prior year. In addition, favorable claim experience in the current year reduced dental policyholder benefits and claims. Additionally, disability
business included a $22 million benefit which resulted from reserve refinements in the current year. The year over year variance in disability
also includes the impact of an $18 million loss related to Hurricane Katrina in the prior year. Group life’s policyholder benefits and claims
increased by $238 million, largely due to the aforementioned growth in the business, partially offset by favorable underwriting results,
particularly in the term life business. Term life included a benefit of $16 million due to reserve refinements in the current year. Partially
offsetting the increase was a retirement & savings’ policyholder benefits and claims decrease of $205 million, predominantly due to the
aforementioned decrease in revenues, partially offset by higher FAS 60 interest credits recorded in policyholder benefits and claims due to
growth in structured settlements and MTF.
The increase in other expenses of $79 million was primarily due to an increase in the current year of $60 million in non-deferrable
volume related expenses and corporate support expenses. Non-deferrable volume related expenses include those expenses associated
with information technology, direct departmental spending and commission expenses. Corporate support expenses include advertising,
corporate overhead and consulting fees. Also contributing to the increase was $26 million associated with costs related to the sale of
certain small market recordkeeping businesses, $23 million of non-deferrable LTC commission expense, $24 million related to costs
associated with a previously announced regulatory settlement and $11 million related to stock-based compensation. Partially offsetting
these increases were benefits due to prior year charges of $43 million in Travelers-related integration costs, principally incentive accruals
and $22 million related to an adjustment of DAC for certain LTC products.
26 MetLife, Inc.