MetLife 2008 Annual Report Download - page 34

An increase in underwriting results of $90 million, net of income tax, as compared to 2006, contributed to the increase in income from
continuing operations. Management attributes this increase primarily to the non-medical health & other, group life and retirement & savings
businesses with increases of $66 million, $16 million and $8 million, all net of income tax, respectively.
Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity,
or other insurance costs less claims incurred, and the change in insurance-related liabilities. Underwriting results are significantly
influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain
blocks of business. Consequently, results can fluctuate from period to period.
Partially offsetting this increase in income from continuing operations were higher expenses related to an increase in non-deferrable
volume-related expenses and corporate support expenses of $72 million, net of income tax, as well as an increase in DAC amortization of
$44 million, net of income tax, primarily due to a charge of $40 million, net of income tax, due to the ongoing impact on DAC and VOBA
amortization resulting from the implementation of SOP 05-1 in 2007. This increase in expense was partially offset by the impact of certain
revisions in both years for a net decrease of $34 million, net of income tax. The remaining increase in operating expenses was more than
offset by the remaining increase in premiums, fees, and other revenues.
Revenues
Total revenues, excluding net investment gains (losses), increased by $1,510 million, or 7%, to $22,096 million for the year ended
December 31, 2007 from $20,586 million for the comparable 2006 period.
Net investment income increased by $916 million. Management attributes $744 million of this increase to growth in the average asset
base primarily within mortgage loans on real estate, fixed maturity securities, real estate joint ventures, other limited partnership interests,
and equity securities, driven by continued business growth, particularly growth in the funding agreements and global GIC businesses.
Additionally, management attributes $172 million of this increase in net investment income to an increase in yields, primarily due to higher
returns on fixed maturity securities, improved securities lending results, other limited partnership interests, and equity securities, partially
offset by a decline in yields on real estate and real estate joint ventures and mortgage loans.
The increase of $594 million in premiums, fees and other revenues was largely due to increases in the non-medical health & other
business of $483 million, primarily due to growth in the dental, disability, AD&D and IDI businesses of $478 million. Partially offsetting these
increases in the non-medical health & other business is a decline in the LTC business of $7 million, which includes a $66 million decrease
resulting from a shift to deposit liability-type contracts in 2007. Excluding this shift, LTC premiums would have increased due to growth in
the business. Group life increased $345 million, which management primarily attributes to a $262 million increase in term life, primarily due
to growth in the business from new sales and an increase in reinsurance assumed, partially offset by the impact of an increase in
experience rated refunds. In addition, COLI and life insurance sold to postretirement benefit plans increased by $65 million and $30 million,
respectively. The increase in COLI is largely attributable to fees earned on a large sale in 2007. These increases in group life’s premiums,
fees and other revenues were partially offset by a decrease of $5 million in the universal life insurance products. Partially offsetting the
increase in premiums, fees and other revenues was a decline in retirement & savings’ premiums, fees and other revenues of $234 million,
primarily from declines of $158 million and $79 million in structured settlement and pension closeout premiums, respectively, partially offset
by an increase of $3 million across several products. The declines in the structured settlement and pension closeout businesses are
predominantly due to the impact of lower sales in 2007. Premiums, fees and other revenues from retirement & savings products are
significantly influenced by large transactions and, as a result, can fluctuate from period to period.
Expenses
Total expenses increased by $1,064 million, or 6%, to $19,338 million for the year ended December 31, 2007 from $18,274 million for
the comparable 2006 period.
The increase in expenses was attributable to higher interest credited to policyholder account balances of $501 million, higher
policyholder benefits and claims of $437 million and an increase in operating expenses of $126 million.
Management attributes the increase of $501 million in interest credited to policyholder account balances to a $352 million increase
solely from growth in the average policyholder account balances, primarily resulting from growth in global GICs and funding agreements
within the retirement & savings business and a $149 million increase from a rise in average crediting rates, largely due to the global GIC
program, coupled with a rise in short-term interest rates in 2007.
The increase in policyholder benefits and claims of $437 million included a $16 million decrease related to net investment gains
(losses). Excluding the decrease related to net investment gains (losses), policyholder benefits and claims increased by $453 million. Non-
medical health & other’s policyholder benefits and claims increased by $383 million. This increase was largely due to a $369 million
increase in the dental, disability, IDI and AD&D businesses, resulting from the aforementioned growth in business. This increase was
partially offset by favorable claim experience in the dental business and favorable morbidity experience in the disability, IDI and AD&D
businesses. This increase included charges related to certain refinements of $14 million in 2007 in LTD and the impact of a $22 million
disability liability reduction in 2006, which contributed to the increase. An increase in LTC of $14 million is largely attributable to business
growthandanincreaseininterestcredited,partiallyoffsetbytheaforementioned$66millionshifttodepositliability-typecontractsandthe
impact of more favorable claim experience in 2007. Group life’s policyholder benefits and claims increased by $264 million due mostly to
an increase in the term life business of $245 million, which included the impact of less favorable mortality in the term life product, partially
offset by the net impact of favorable liability refinements of $12 million in 2007. An increase of $29 million in life insurance sold to
postretirement plans and $25 million for other group life products, including COLI, also contributed to the increase in policyholder benefits
and claims for group life. The increases in term life and life insurance sold to postretirement benefit plans are commensurate with the
aforementioned premiums increases. These increases were partially offset by a decline in universal group life products of $36 million,
primarily due to favorable claim experience. Retirement & savings’ policyholder benefits decreased by $194 million, which was largely due
to decreases in the pension closeout and structured settlement businesses of $98 million and $97 million, respectively. The decrease in
pension closeouts was primarily due to the aforementioned decrease in premiums and a decrease in interest credited. The decline in
structured settlements was primarily a result of the aforementioned decline in premiums, partially offset by an increase in interest credited
and less favorable mortality experience in 2007. In addition, this decrease included the net impact of favorable liability refinements in 2007,
which contributed a decrease of $20 million, and the net impact of favorable liability refinements in 2006 of $57 million, largely related to
31MetLife, Inc.