MetLife 2007 Annual Report Download - page 54

Litigation. Putative or certified class action litigation and other litigation, and claims and assessments against the Company, in addition
to those discussed elsewhere herein and those otherwise provided for in the Company’s consolidated financial statements, have arisen in
the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, employer, investor,
investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make
inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable
ranges of potential losses except as noted elsewhere herein in connection with specific matters. In some of the matters referred to herein,
very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations, it is
possible that an adverse outcome in certain cases could have a material adverse effect upon the Company’s financial position, based on
information currently known by the Company’s management, in its opinion, the outcome of such pending investigations and legal
proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters
and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a
material adverse effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Other. Based on management’s analysis of its expected cash inflows from operating activities, the dividends it receives from
subsidiaries, including MLIC, that are permitted to be paid without prior insurance regulatory approval and its portfolio of liquid assets
and other anticipated cash flows, management believes there will be sufficient liquidity to enable the Company to make payments on debt,
make cash dividend payments on its common and preferred stock, pay all operating expenses, and meet its cash needs. The nature of the
Company’s diverse product portfolio and customer base lessens the likelihood that normal operations will result in any significant strain on
liquidity.
Consolidated Cash Flows. Net cash provided by operating activities increased by $3.4 billion to $10.0 billion for the year ended
December 31, 2007 as compared to $6.6 billion for the year ended December 31, 2006 primarily due to higher net investment income and
premiums, fees and other revenues.
Net cash provided by operating activities decreased by $1.4 billion to $6.6 billion for the year ended December 31, 2006 as compared
to $8.0 billion for the comparable 2005 period. The decrease in operating cash flows was primarily due to reinsurance receivables related
to the sale of certain small market recordkeeping businesses. Partially offsetting the decrease was an increase in operating cash flows in
2006 over the comparable 2005 period primarily attributable to the acquisition of Travelers.
Net cash provided by financing activities was $3.9 billion and $15.4 billion for the years ended December 31, 2007 and 2006,
respectively. Accordingly, net cash provided by financing activities decreased by $11.5 billion for the year ended December 31, 2007 as
compared to the prior year. Net cash provided by financing activities decreased primarily as a result of a decrease of $13.0 billion in the
amount of securities lending cash collateral received in connection with the Company’s securities lending program and other cash
collateral, $1.2 billion of an increase in shares acquired under the Company’s common stock repurchase program, a decrease in short-
term debt borrowings of $0.8 billion and a decrease of $0.6 billion in net cash provided by policyholder account balances. In addition, net
cash provided by financing activities was $0.5 billion lower than the comparable 2006 period due to the issuance of $0.7 billion of junior
subordinated debt securities in 2007 as compared to $1.2 billion issued in 2006. These decreases were partially offset by an increase in
the issuance of collateral financing arrangements of $4.0 billion and an increase in net issuances versus net repayments of long-term debt
of $0.9 billion.
Net cash provided by financing activities was $15.4 billion and $14.5 billion for the years ended December 31, 2006 and 2005,
respectively. Accordingly, net cash provided by financing activities increased by $0.9 billion primarily as a result of an increase of
$7.2 billion in the amount of securities lending cash collateral received in connection with the securities lending program, a decrease in
long-term debt repayments of $0.7 billion, an increase in the issuance of collateral financing arrangements of $0.9 billion and an increase in
short-term debt borrowings of $0.1 billion. Such increases were offset by decreases in financing cash flows resulting from a decrease in
issuance of preferred stock, junior subordinated debt securities, and long-term debt aggregating $6.6 billion which were principally used to
finance the acquisition of Travelers in 2005, combined with a decrease of $0.9 billion associated with a decrease in net policyholder
account balance deposits and an increase of $0.5 billion of shares acquired under the Company’s common stock repurchase program
which was resumed in the fourth quarter of 2006.
Net cash used in investing activities was $10.6 billion and $18.9 billion for the years ended December 31, 2007 and 2006, respectively.
Accordingly, net cash used in investing activities decreased by $8.3 billion for the year ended December 31, 2007 as compared to prior
year. In the current year, cash available for the purchase of invested assets decreased by $11.5 billion as a result of the reduction in cash
provided by financing activities discussed above. Also, partially offsetting this decrease was an increase of $3.4 billion in net cash provided
by operating activities discussed above. The lower amount of cash available for investing activities resulted in a decrease in net purchases
of fixed maturity securities of $15.9 billion, other invested assets of $1.4 billion, and a decrease in net origination of mortgage and
consumer loans of $0.6 billion. This was partially offset by increases in the net purchases of real estate and real estate joint ventures of
$6.3 billion, equity securities of $1.4 billion and other limited partnership interests of $0.8 billion. Also, there was a decrease in cash
provided by short-term investments of $0.5 billion. In addition, the 2007 period includes the sale of MetLife Australia’s annuities and
pension businesses and the acquisition of the remaining 50% interest in MetLife Fubon of $0.7 billion, while the 2006 period includes
additional consideration paid related to purchases of businesses $0.1 billion.
Net cash used in investing activities was $18.9 billion and $22.6 billion for the years ended December 31, 2006 and 2005, respectively.
Accordingly, net cash used in investing activities decreased by $3.7 billion for the year ended December 31, 2006 as compared to prior
year. Net cash used in investing activities in the prior year included cash used to acquire Travelers of $11.0 billion, less cash acquired of
$0.9 billion for a net total cash paid of $10.1 billion, which was funded by $6.8 billion in securities issuances and $4.2 billion of cash
provided by operations and the sale of invested assets. During the current year, cash available for investment as a result of cash collateral
received in connection with the securities lending program increased by $7.2 billion. Cash available from operations and available for
investment decreased by $1.4 billion. Cash available for the purchase of invested assets increased by $4.3 billion as a result of the
increase in securities lending activities of $7.2 billion as well as a decrease in the cash required for acquisitions of $4.2 billion, offset by the
decrease in issuance of preferred stock, junior subordinated debt securities, and long-term debt aggregating $6.6 billion as well as the
50 MetLife, Inc.