MetLife 2007 Annual Report Download - page 40

• The Company’s operation in Ireland reduced operating income by $34 million, net of income tax, due to start-up expenses in the
current year. A valuation allowance was established against the deferred income tax benefit resulting from the Ireland losses.
Partially offsetting these decreases in income from continuing operations were increases in:
• South Korea by $79 million, net of income tax, primarily due to continued growth of the in-force business, a one-time benefit of
$38 million, net of income tax, associated with the implementation of a more refined reserve valuation system, as well as a benefit of
$13 million from the impact of foreign currency exchange rates.
• Argentina by $61 million, net of income tax, due to higher net investment income resulting from capital contributions since the
completion of the Travelers acquisition, the release of liabilities for pending claims that were determined to be invalid following a
review, the favorable impact of foreign currency exchange rates and inflation rates on certain contingent liabilities, the utilization of
$4 million of net operating losses for which a valuation allowance had been previously established, a $12 million increase in the prior
year period of a deferred income tax valuation allowance established against tax benefits in that year, as well as business growth.
• Australia by $22 million, net of income tax, primarily due to reserve strengthening on a block of business in the prior year, as well as
business growth.
• Chile by $5 million, net of income tax, primarily due to growth in the institutional business of $2 million, as well as the favorable impact
of foreign currency exchange rates of $2 million.
• The United Kingdom by $5 million, net of income tax, primarily due to growth of the in-force business.
The remainder of the decrease in income from continuing operations can be attributed to other countries. Changes in foreign currency
exchange rates accounted for $2 million of the increase in income from continuing operations.
Revenues
Total revenues, excluding net investment gains (losses), increased by $925 million, or 26%, to $4,504 million for the year ended
December 31, 2006 from $3,579 million for the comparable 2005 period. The acquisition of Travelers contributed $366 million during the
first six months of 2006 to the period over period increase. Excluding the impact of Travelers, such revenues increased by $559 million, or
16%, over the comparable 2005 period.
Premiums, fees and other revenues increased by $469 million, or 17%, to $3,254 million for the year ended December 31, 2006 from
$2,785 million for the comparable 2005 period.
Premiums, fees and other revenues increased in:
• Mexico by $159 million, primarily due to higher fees and growth in its universal life and institutional business, partially offset by an
adjustment for experience refunds on a block of business and various one-time other revenue items for which the prior year benefited
by $19 million and the current year benefited by $16 million.
• South Korea by $156 million primarily due to business growth driven by strong sales of its variable universal life product, as well as the
favorable impact of foreign currency exchange rates of $56 million.
• Brazil by $49 million due to business growth and higher bancassurance business, as well as an increase in amounts retained under
reinsurance arrangements.
• Chile by $22 million primarily due to the favorable impact of foreign currency exchange rates of $14 million, as well as an increase in
institutional premiums through its bank distribution channel, partially offset by lower annuity sales due in part from management’s
decision not to match aggressive pricing in the marketplace.
• The United Kingdom, Argentina, Australia, and Taiwan by $21 million, $16 million, $15 million, and $12 million respectively, primarily
due to business growth.
Increases in other countries accounted for the remainder of the change.
Net investment income increased by $90 million, or 11%, to $884 million for the year ended December 31, 2006 from $794 million for
the comparable 2005 period.
Net investment income increased in:
• Argentina by $41 million primarily due to higher invested assets resulting from capital contributions since the completion of the
Travelers acquisition.
• Mexico by $28 million primarily due to higher inflation rates and increases in invested assets, partially offset by lower average
investment yields.
• South Korea, Brazil and Taiwan by $25 million, $14 million and $5 million, respectively, primarily due to increases in invested assets,
as well as the favorable impact of foreign currency exchange rates of $10 million.
• Homeofficeby$17millionprimarilyduetoareductionintheamountchargedforeconomiccapitalfromtheprioryear.
Partially offsetting these increases in net investment income were decreases in:
• Chile by $8 million primarily due to a reduction in the inflation rate, partially offset by the favorable impact of foreign currency
exchange rates of $8 million and increases in invested assets. The invested asset valuations and returns on these invested assets are
linked to inflation rates in most of the Latin American countries in which the Company does business.
• Canada by $33 million due to the realignment of economic capital.
Increases in other countries accounted for the remainder of the change.
Changes in foreign currency exchange rates had a favorable impact of $105 million on total revenues, excluding net investment gains
(losses).
Expenses
Total expenses increased by $857 million, or 25%, to $4,227 million for the year ended December 31, 2006 from $3,370 million for the
comparable 2005 period. The acquisition of Travelers contributed $346 million during the first six months of 2006 to the year over year
increase. Excluding the impact of Travelers, total expenses increased by $511 million, or 15%, over the comparable 2005 period.
Policyholder benefits and claims, policyholder dividends and interest credited to policyholder account balances increased by
$187 million, or 8%, to $2,560 million for the year ended December 31, 2006 from $2,373 million for the comparable 2005 period.
Policyholder benefits and claims, policyholder dividends and interest credited to policyholder account balances increased in:
• Mexico by $113 million primarily due to an increase in other policyholder benefits and claims of $108 million and in interest credited to
policyholder account balances of $39 million commensurate with the growth in revenue discussed above. These increases in Mexico
36 MetLife, Inc.