MetLife 2008 Annual Report Download - page 197

In the years prior to commutation, the excess insurance policies for asbestos-related claims were subject to annual and per claim
sublimits. Amounts exceeding the sublimits during 2007, 2006 and 2005 were approximately $16 million, $8 million and $0, respectively.
Amounts were recoverable under the policies annually with respect to claims paid during the prior calendar year. Each asbestos-related
policy contained an experience fund and a reference fund that provided for payments to MLIC at the commutation date if the reference fund
was greater than zero at commutation or pro rata reductions from time to time in the loss reimbursements to MLIC if the cumulative return
on the reference fund was less than the return specified in the experience fund. The return in the reference fund was tied to performance of
the S&P 500 Index and the Lehman Brothers Aggregate Bond Index. A claim with respect to the prior year was made under the excess
insurance policies in each year from 2003 through 2008 for the amounts paid with respect to asbestos litigation in excess of the retention.
The foregone loss reimbursements were approximately $62.2 million with respect to claims for the period of 2002 through 2007. Because
the policies were commuted as of September 30, 2008, there will be no claims under the policies or forgone loss reimbursements with
respect to payments made in 2008 and thereafter.
The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably
estimable losses for asbestos-related claims. MLIC’s recorded asbestos liability is based on its estimation of the following elements, as
informed by the facts presently known to it, its understanding of current law, and its past experiences: (i) the probable and reasonably
estimable liability for asbestos claims already asserted against MLIC, including claims settled but not yet paid; (ii) the probable and
reasonably estimable liability for asbestos claims not yet asserted against MLIC, but which MLIC believes are reasonably probable of
assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying MLIC’s analysis of the
adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims;
and (iii) the cost to defend claims.
MLIC reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience,
reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos
liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables
include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending
claims involving serious disease, the number of new claims filed against it and other defendants, and the jurisdictions in which claims are
pending. As previously disclosed, in 2002 MLIC increased its recorded liability for asbestos-related claims by $402 million from
approximately $820 million to $1,225 million. Based upon its regular reevaluation of its exposure from asbestos litigation, MLIC has
updated its liability analysis for asbestos-related claims through December 31, 2008.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries from state regulators, including state insurance commissioners;
state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities,
including congressional committees; and the Financial Industry Regulatory Authority seeking a broad range of information. The issues
involved in information requests and regulatory matters vary widely. Certain regulators have requested information and documents
regarding contingent commission payments to brokers, the Company’s awareness of any “sham” bids for business, bids and quotes that
the Company submitted to potential customers, incentive agreements entered into with brokers, or compensation paid to intermediaries.
Regulators also have requested information relating to market timing and late trading of mutual funds and variable insurance products and,
generally, the marketing of products. The Company has received a subpoena from the Office of the U.S. Attorney for the Southern District
of California asking for documents regarding the insurance broker Universal Life Resources. The Company has been cooperating fully with
these inquiries.
Regulatory authorities in a small number of states have had investigations or inquiries relating to sales of individual life insurance policies
or annuities or other products by MLIC; New England Mutual Life Insurance Company, New England Life Insurance Company and New
England Securities Corporation (collectively “New England”); GALIC; Walnut Street Securities, Inc. (“Walnut Street Securities”) and MetLife
Securities, Inc. (“MSI”). Over the past several years, these and a number of investigations by other regulatory authorities were resolved for
monetary payments and certain other relief. The Company may continue to resolve investigations in a similar manner.
MSI is a defendant in two regulatory matters brought by the Illinois Department of Securities. In 2005, MSI received a notice from the
Illinois Department of Securities asserting possible violations of the Illinois Securities Act in connection with sales of a former affiliate’s
mutual funds. A response has been submitted and in January 2008, MSI received notice of the commencement of an administrative action
by the Illinois Department of Securities. In May 2008, MSI’s motion to dismiss the action was denied. In the second matter, in December
2008 MSI received a Notice of Hearing from the Illinois Department of Securities based upon a complaint alleging that MSI failed to
reasonably supervise one of its former registered representatives in connection with the sale of variable annuities to Illinois investors. MSI
intends to vigorously defend against the claims in these matters.
In June 2008, the Environmental Protection Agency issued a Notice of Violation (“NOV”) regarding the operations of the Homer City
Generating Station, an electrical generation facility. The NOV alleges, among other things, that the electrical generation facility is being
operated in violation of certain federal and stateCleanAirActrequirements.HomerCityOL6LLC,anentityownedbyMLIC,isapassive
investor with a minority interest in the electrical generation facility, which is solely operated by the lessee, EME Homer City Generation L.P.
(“EME Homer”). Homer City OL6 LLC and EME Homer are among the respondents identified in the NOV. EME Homer has been notified of its
obligation to indemnify Homer City OL6 LLC and MLIC for any claims resulting from the NOV and has expressly acknowledged its obligation
to indemnify Homer City OL6 LLC.
Other Litigation
Jacynthe Evoy-Larouche v. Metropolitan Life Ins. Co. (Que. Super. Ct., filed March 1998). This putative class action lawsuit involving
sales practices claims is pending against MLIC in Canada. Plaintiff alleges misrepresentations regarding dividends and future payments for
life insurance policies and seeks unspecified damages.
F-74 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)