MetLife 2008 Annual Report Download - page 13

prior to the closing of the exchange offer. The 3,000,000 shares of the RGA Class A common stock were not subject to the tax-free
exchange.
As a result of completion of the recapitalization and exchange offer, the Company received from MetLife stockholders
23,093,689 shares of the Company’s common stock with a market value of $1,318 million and, in exchange, delivered 29,243,539 shares
of RGA’s Class B common stock with a net book value of $1,716 million. The resulting loss on disposition, inclusive of transaction costs of
$60 million, was $458 million. The 3,000,000 shares of RGA Class A common stock retained by the Company are marketable equity
securities which do not constitute significant continuing involvement in the operations of RGA; accordingly, they have been classified within
equity securities in the consolidated financial statements of the Company at a cost basis of $157 million which is equivalent to the net book
value of the shares. The cost basis will be adjusted to estimated fair value at each subsequent reporting date. The Company has agreed to
dispose of the remaining shares of RGA within the next five years. In connection with the Company’s agreement to dispose of the remaining
shares, the Company also recognized, in its provision for income tax on continuing operations, a deferred tax liability of $16 million which
represents the difference between the book and taxable basis of the remaining investment in RGA.
The impact of the disposition of the Company’s investment in RGA is reflected in the Company’s consolidated financial statements as
discontinued operations. The disposition of RGA results in the elimination of the Company’s Reinsurance segment. The Reinsurance
segment was comprised of the results of RGA, which at disposition became discontinued operations of Corporate & Other, and the interest
on economic capital, which has been reclassified to the continuing operations of Corporate & Other.
Disposition of Texas Life Insurance Company
MetLife, Inc. has entered into an agreement to sell Cova Corporation, the parent company of Texas Life Insurance Company in early
2009. As a result of the sale agreement, the Company recognized gains from discontinued operations of $37 million, net of income tax, in
the fourth quarter of 2008. The gain was comprised of recognition of tax benefits of $65 million relating to the excess of outside tax basis of
Cova over its financial reporting basis offset by other than temporary impairments of $28 million, net of income tax, relating to Cova’s
investments. The Company has reclassified the assets and liabilities of Cova as held-for-sale and its operations into discontinued
operations for all periods presented in the consolidated financial statements.
2008 Acquisitions
During 2008, the Company made five acquisitions for $783 million. As a result of these acquisitions, MetLife’s Institutional segment
increased its product offering of dental and vision benefit plans, MetLife Bank within Corporate & Other entered the mortgage origination
and servicing business and the International segment increased its presence in Mexico and Brazil. The acquisitions were each accounted
for using the purchase method of accounting, and accordingly, commenced being included in the operating results of the Company upon
their respective closing dates. Total consideration paid by the Company for these acquisitions consisted of $763 million in cash and
$20 million in transaction costs. The net fair value of assets acquired and liabilities assumed totaled $527 million, resulting in goodwill of
$256 million. Goodwill increased by $122 million, $73 million and $61 million in the International segment, Institutional segment and
Corporate & Other, respectively. The goodwill is deductible for tax purposes. Value of customer relationships acquired (“VOCRA”), VOBA
and other intangibles increased by $137 million, $7 million and $6 million, respectively, as a result of these acquisitions.
Other Acquisitions and Dispositions
On June 28, 2007, the Company acquired the remaining 50% interest in a joint venture in Hong Kong, MetLife Fubon Limited (“MetLife
Fubon”),for$56millionincash,resultinginMetLifeFubonbecoming a consolidated subsidiary of the Company. The transaction was
treated as a step acquisition, and at June 30, 2007, total assets and liabilities of MetLife Fubon of $839 million and $735 million,
respectively, were included in the Company’s consolidated balance sheet. The Company’s investment for the initial 50% interest in MetLife
Fubon was $48 million. The Company used the equity method of accounting for such investment in MetLife Fubon. The Company’s share
of the joint venture’s results for the six months ended June 30, 2007, was a loss of $3 million. The fair value of the assets acquired and the
liabilities assumed in the step acquisition at June 30, 2007, was $427 million and $371 million, respectively. No additional goodwill was
recorded as a part of the step acquisition. As a result of this acquisition, additional VOBA and VODA of $45 million and $5 million,
respectively, were recorded and both have a weighted average amortization period of 16 years. In June 2008, the Company revised the
valuation of certain long-term liabilities, VOBA, and VODA based on new information received. As a result, the fair value of acquired
insurance liabilities and VOBA were reduced by $5 million and $12 million, respectively, offset by an increase in VODA of $7 million. The
revised VOBA and VODA have a weighted average amortization period of 11 years.
On June 1, 2007, the Company completed the sale of its Bermuda insurance subsidiary, MetLife International Insurance, Ltd. (“MLII”), to
athirdpartyfor$33millionincashconsideration,resultinginagainupondisposalof$3million,netofincometax.ThenetassetsofMLIIat
disposal were $27 million. A liability of $1 million was recorded with respect to a guarantee provided in connection with this disposition.
On July 1, 2005, the Company completed the acquisition of Travelers for $12.1 billion. The acquisition was accounted for using the
purchase method of accounting. The net fair value of assets acquired and liabilities assumed totaled $7.8 billion, resulting in goodwill of
$4.3 billion. The initial consideration paid by the Company in 2005 for the acquisition consisted of $10.9 billion in cash and
22,436,617 shares of the Company’s common stock with a market value of $1.0 billion to Citigroup and $100 million in other transaction
costs. The Company revised the purchase price as a result of the finalization by both parties of their review of the June 30, 2005 financial
statements and final resolution as to the interpretation of the provisions of the acquisition agreement which resulted in a payment of
additional consideration of $115 million by the Company to Citigroup in 2006.
Industry Trends
The Company’s segments continue to be influenced by a variety of trends that affect the industry.
Financial and Economic Environment. Our results of operations are materially affected by conditions in the global capital markets and
the economy generally, both in the United States and elsewhere around the world. The stress experienced by global capital markets that
began in the second half of 2007 has continued and substantially increased; since mid- September 2008, the global financial markets have
experienced unprecedented disruption, adversely affecting the business environment in general, as well as the financial services industry,
in particular. There is consensus in the economic community that the U.S. economy is in a recession.
10 MetLife, Inc.