MetLife 2007 Annual Report Download - page 38

• Hong Kong by $43 million primarily due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting
consolidation of the operation.
• Japan by $19 million due to an increase of $52 million from hedging activities associated with Japan’s guaranteed annuity, offset by a
decrease of $33 million, net of income tax, in the Company’s investment in Japan primarily due to an increase in the costs of
guaranteed annuity benefits and the impact of foreign currency transaction losses, partially offset by business growth.
• South Korea and Taiwan by $24 million and $6 million, respectively, primarily due to increases in invested assets.
• Brazil by $14 million primarily due to increases in invested assets as well as changes in foreign currency exchange rates.
• Australia by $12 million due to changes in foreign currency exchange rates, higher yields and increases in invested assets.
• Ireland by $9 million due to an increase in invested assets resulting from capital contributions.
• India by $4 million due to an increase in invested assets, as well as higher yields.
Partially offsetting these increases in net investment income was a decrease in:
• The home office of $25 million primarily due to an increase in the amount charged for economic capital and investment management
expenses.
• Argentina by $7 million primarily due to unfavorable results in the trading portfolio, partially offset by higher invested assets resulting
from capital contributions in the prior year. Additionally, net investment income in the prior year did not decrease correspondingly with
the decrease in policyholder benefits and claims discussed below because the prior year did not include interest- and inflation-
indexed assets to support such liabilities.
The remainder of the change in net investment income can be attributed to contributions from the other countries.
Changes in foreign currency exchange rates accounted for a $106 million increase in total revenues, excluding net investment gains
(losses).
Expenses
Total expenses increased by $338 million, or 8%, to $4,565 million for the year ended December 31, 2007 from $4,227 million for the
comparable 2006 period.
Policyholder benefits and claims, policyholder dividends and interest credited to policyholder account balances increased by
$119 million, or 4%, to $2,817 million for the year ended December 31, 2007 from $2,698 million for the comparable 2006 period.
Policyholder benefits and claims, policyholder dividends and interest credited to policyholder account balances increased in:
• Chile by $221 million primarily due to an increase in inflation indexed policyholder liabilities as well as growth in its annuity and
institutional businesses.
• Hong Kong by $119 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of
the operation.
• Taiwan by $65 million primarily due to a decrease of $14 million in the prior year from liability refinements associated with the
conversion to a new valuation system, as well as higher policyholder liabilities related to loss recognition in the fourth quarter of 2006
and growth in the business.
• South Korea by $27 million primarily due to business growth as well as changes in foreign currency exchange rates, partially offset by
a lower increase in claims liabilities resulting from a change in the reinsurance allowance in the prior year.
• Australia by $23 million due to higher claims, an increase in retention levels, business growth and changes in foreign currency
exchange rates.
• India by $4 million due to higher claims and business growth, partially offset by management’s update of assumptions used to
determine estimated gross profits.
Partially offsetting these increases in policyholder benefits and claims, policyholder dividends and interest credited to policyholder
account balances were decreases in:
• Argentina by $250 million primarily due to the elimination of liabilities for claims and premium deficiencies of $208 million resulting
from pension reform. Under the reform plan, which is effective January 1, 2008, fund administrators are no longer liable for new death
and disability claims of the plan participants. Also contributing is a decrease in interest- and market-indexed policyholder liabilities
and the favorable impact of reductions in claim liabilities resulting from experience reviews in both the current and prior years.
• Mexico by $63 million, primarily due to a decrease in certain policyholder liabilities of $117 million caused by a decrease in the
unrealized investment results on the invested assets supporting those liabilities relative to the prior year and a reduction in claim
liabilities resulting from experience reviews, offset by an increase of $10 million due to a decrease in the prior year of policyholder
benefits associated with a large group policy that was not renewed by the policyholder, an increase of $6 million due to a benefit in
the prior year from the elimination of liabilities for pending claims that were determined to be invalid following a review, as well as
business growth.
• Brazil of $13 million primarily due to the impact in the prior year of increases in policyholder liabilities from higher than expected
mortality on specific blocks of business, partially offset by changes in foreign currency exchange rates.
• The United Kingdom by $8 million, due to a reduction of claim liabilities based on a review of experience.
Decreases in other countries accounted for the remainder of the change.
Other expenses increased by $219 million, or 14%, to $1,748 million for the year ended December 31, 2007 from $1,529 million for the
comparable 2006 period.
Other expenses increased in:
• Argentina by $153 million, primarily due to a liability of $128 million for servicing obligations that was established as a result of
pension reform. Under the reform plan, which is effective January 1, 2008, the Company retains the obligation for administering
certain existing and future participants’ accounts for which they receive no revenue. Also contributing is an increase in commissions
on bancassurance business, an increase in retention incentives related to pension reform, the impact of management’s update of
DAC assumptions as a result of pension reform and growth, partially offset by a lower increase in liabilities due to inflation and
exchange rate indexing.
• South Korea by $92 million, primarily due to the favorable impact in the prior year of $60 million in DAC amortization associated with
the implementation of a more refined reserve valuation system and additional expenses in the current year associated with growth
34 MetLife, Inc.