MetLife 2008 Annual Report Download - page 181

reinsurance; however, under the new retention guidelines, the Company reinsures up to 90% of the mortality risk in excess of $1 million for
most new individual life insurance policies that it writes through its various franchises and for certain individual life policies the retention
limits remained unchanged. On a case by case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in
excess of the Company’s retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its
retention at any time. In addition, the Company reinsures a significant portion of the mortality risk on its individual universal life policies
issued since 1983. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific
characteristics.
The Company’s Individual segment also reinsures a portion of the living and death benefit riders issued in connection with its variable
annuities. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on rider fees collected from
policyholders and receives reimbursements for benefits paid or accrued in excess of account values, subject to certain limitations. The
Company enters into similar agreements for new or in-force business depending on market conditions.
The Institutional segment generally retains most of its risks and does not significantly utilize reinsurance. The Company may, on certain
client arrangements, cede particular risks to reinsurers.
The Auto & Home segment purchases reinsurance to control its exposure to large losses (primarily catastrophe losses) and to protect
statutory surplus. Auto & Home cedes to reinsurers a portion of losses and cedes premiums based upon the risk and exposure of the
policies subject to reinsurance. To control exposure to large property and casualty losses, Auto & Home utilizes property catastrophe,
casualty, and property per risk excess of loss agreements.
The Company also reinsures through 100% quota-share reinsurance agreements certain long-term care and workers’ compensation
business written by MICC prior to the Company’s acquisition of MICC. These run-off businesses have been included within Corporate &
Other since the acquisition of MICC.
In addition to reinsuring mortality risk as described previously, the Company reinsures other risks, as well as specific coverages. The
Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The
Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company’s results of operations. The
Company uses excess of retention and quota share reinsurance arrangements to provide greater diversification of risk and minimize
exposure to larger risks.
The Company reinsures its business through a diversified group of reinsurers. In the event that reinsurers do not meet their obligations
to the Company under the terms of the reinsurance agreements, reinsurance balances recoverable could become uncollectible. Cessions
under reinsurance arrangements do not discharge the Company’s obligations as the primary insurer.
The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of
reinsurance is as follows:
2008 2007 2006
Years Ended December 31,
(In millions)
Premiums:
Directpremiums............................................. $27,058 $24,149 $23,308
Reinsuranceassumed......................................... 1,466 1,192 928
Reinsuranceceded........................................... (2,610) (2,371) (2,184)
Netpremiums............................................. $25,914 $22,970 $22,052
Universal life and investment-type product policy fees:
Directuniversallifeandinvestment-typeproductpolicyfees ................ $ 5,909 $ 5,686 $ 5,146
Reinsuranceassumed......................................... 79 54 20
Reinsuranceceded........................................... (607) (502) (455)
Netuniversallifeandinvestment-typeproductpolicyfees................. $ 5,381 $ 5,238 $ 4,711
Policyholder benefits and claims:
Directpolicyholderbenefitsandclaims .............................. $29,772 $25,507 $24,649
Reinsuranceassumed......................................... 1,235 804 847
Reinsuranceceded........................................... (3,570) (2,528) (2,627)
Netpolicyholderbenefitsandclaims .............................. $27,437 $23,783 $22,869
F-58 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)