MetLife 2008 Annual Report Download - page 72

(1) See “— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Acquisitions and Dispositions” for a
description of acquisitions and dispositions.
(2) Consists principally of foreign currency translation adjustments.
Information regarding goodwill by segment and reporting unit is as follows:
2008 2007
December 31,
(In millions)
Institutional:
Grouplife .......................................................... $ 15 $ 15
Retirement&savings................................................... 887 887
Non-medicalhealth&other............................................... 149 76
Subtotal.......................................................... 1,051 978
Individual:
Traditionallife........................................................ 73 73
Variable&universallife.................................................. 1,174 1,174
Annuities........................................................... 1,692 1,692
Other ............................................................. 18 18
Subtotal.......................................................... 2,957 2,957
International:
LatinAmericaregion ................................................... 184 104
Europeanregion ...................................................... 37 50
AsiaPacificregion..................................................... 152 159
Subtotal.......................................................... 373 313
Auto&Home.......................................................... 157 157
Corporate&Other(1)..................................................... 470 409
Total ............................................................... $5,008 $4,814
(1) The allocation of the goodwill to the reporting units is performed at the time of the respective acquisition. The $470 million of goodwill
within Corporate & Other relates to goodwill acquired as a part of the Travelers acquisition of $405 million, as well as acquisitions by
MetLife Bank which resides within Corporate & Other. For purposes of goodwill impairment testing at December 31, 2008 and 2007,
$405 million of Corporate & Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual
segment was attributed $210 million, (traditional life — $23 million, variable & universal life — $11 million and annuities — $176 million)
and the Institutional segment was attributed $195 million, (group life — $2 million, retirement & savings — $186 million, and non-medical
health & other — $7 million) at both December 31, 2008 and 2007.
For purposes of goodwill impairment testing, if the carrying value of a reporting unit’s goodwill exceeds its estimated fair value, there is
an indication of impairment, and the implied fair value of the goodwill is determined in the same manner as the amount of goodwill would be
determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill is recognized as an
impairment and recorded as a charge against net income. The Company performed its annual goodwill impairment tests during the third
quarter of 2008 based upon data as of June 30, 2008. Such tests indicated that goodwill was not impaired as of September 30, 2008.
Current economic conditions, the sustained low level of equity markets, declining market capitalizations in the insurance industry and lower
operating earnings projections, particularly for the Individual segment, required management of the Company to consider the impact of
these events on the recoverability of its assets, in particular its goodwill. Management concluded it was appropriate to perform an interim
goodwill impairment test at December 31, 2008. Based upon the tests performed management concluded no impairment of goodwill had
occurred for any of the Company’s reporting units at December 31, 2008.
In performing its goodwill impairment tests, when management believes meaningful comparable market data are available, the
estimated fair values of the reporting units are determined using a market multiple approach. When relevant comparables are not
available, the Company uses a discounted cash flow model. For reporting units which are particularly sensitive to market assumptions,
such as the annuities and variable & universal life reporting units within the Individual segment, the Company may corroborate its estimated
fair values by using additional valuation methodologies.
The key inputs, judgments and assumptions necessary in determining estimated fair value include projected operating earnings, current
book value (with and without accumulated other comprehensive income), the level of economic capital required to support the mix of
business, long term growth rates, comparative market multiples, the account value of our in-force business, projections of new and
renewal business as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount
rate management believes appropriate to the risk associated with the respective reporting unit. The estimated fair value of the annuity and
variable & universal life reporting units are particularly sensitive to the equity market levels.
When testing goodwill for impairment, management also considers its market capitalization in relation to its book value. Management
believes that the overall decrease in the Company’s current market capitalization is not representative of a long-term decrease in the value
of the underlying reporting units.
Management applies significant judgment when determining the estimated fair value of its reporting units and when assessing the
relationship of its market capitalization to the estimated fair value of its reporting units and their book value. The valuation methodologies
69MetLife, Inc.