MetLife 2009 Annual Report Download - page 24

Reconciliation of GAAP revenues to operating revenues and GAAP expenses to operating expenses
Year Ended December 31, 2009
Insurance
Products Retirement Products
Corporate
Benefit
Funding Auto & Home International
Banking
Corporate
&Other Total
(In millions)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . $23,483 $ 3,543 $ 5,669 $3,113 $4,383 $ 867 $41,058
Less: Net investment gains (losses) . . . . . . . . . . . (2,258) (1,606) (2,260) (2) (903) (743) (7,772)
Less: Adjustments related to net investment gains
(losses) ............................ (27) — — — — — (27)
Less: Other adjustments to revenues . . . . . . . . . . (74) (217) 187 — (169) 22 (251)
Total operating revenues . . . . . . . . . . . . . . . . . . $25,842 $ 5,366 $ 7,742 $3,115 $5,455 $1,588 $49,108
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . $24,165 $ 4,108 $ 6,982 $2,697 $4,868 $2,571 $45,391
Less: Adjustments related to net investment gains
(losses) ............................ 39 (739) — — — — (700)
Less: Other adjustments to expenses . . . . . . . . . . (1) — 64 — 37 38 138
Total operating expenses . . . . . . . . . . . . . . . . . . $24,127 $ 4,847 $ 6,918 $2,697 $4,831 $2,533 $45,953
Year Ended December 31, 2008
Insurance
Products Retirement Products
Corporate
Benefit
Funding Auto & Home International
Banking
Corporate
&Other Total
(In millions)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . $26,754 $5,630 $ 7,559 $3,061 $6,001 $1,979 $50,984
Less: Net investment gains (losses) . . . . . . . . . . . 1,558 901 (1,629) (134) 169 947 1,812
Less: Adjustments related to net investment gains
(losses) ............................ 18 — — — — — 18
Less: Other adjustments to revenues . . . . . . . . . . (1) (35) 45 — 69 13 91
Total operating revenues . . . . . . . . . . . . . . . . . . $25,179 $4,764 $ 9,143 $3,195 $5,763 $1,019 $49,063
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . $23,418 $5,049 $ 7,735 $2,728 $5,044 $1,949 $45,923
Less: Adjustments related to net investment gains
(losses) ............................ 262 577 — — — — 839
Less: Other adjustments to expenses . . . . . . . . . . (52) — (29) — 17 (4) (68)
Total operating expenses . . . . . . . . . . . . . . . . . . $23,208 $4,472 $ 7,764 $2,728 $5,027 $1,953 $45,152
The volatile market conditions that began in 2008 and continued into 2009 impacted several key components of our operating earnings
available to common shareholders including net investment income, hedging costs, and certain market sensitive expenses. The markets also
positively impacted our operating earnings available to common shareholders as conditions began to improve during 2009, resulting in lower
DAC and DSI amortization.
A $722 million decline in net investment income was the result of decreasing yields, including the effects of our higher quality, more liquid,
but lower yielding investment position in response to the extraordinary market conditions. The impact of declining yields caused a $1.6 billion
decrease in net investment income, which was partially offset by an increase of $846 million due to growth in average invested assets
calculated excluding unrealized gains and losses. The decrease in yields resulted from the disruption and dislocation in the global financial
markets experienced in 2008, which continued, but moderated, in 2009. The adverse yield impact was concentrated in the following four
invested asset classes:
• Fixed maturity securities — primarily due to lower yields on floating rate securities from declines in short-term interest rates and an
increased allocation to lower yielding, higher quality, U.S. Treasury, agency and government guaranteed securities, to increase liquidity
in response to the extraordinary market conditions, as well as decreased income on our securities lending program, primarily due to the
smaller size of the program in the current year. These adverse impacts were offset slightly as conditions improved late in 2009 and we
began to reallocate our portfolio to higher-yielding assets;
• Real estate joint ventures — primarily due to declining property valuations on certain investment funds that carry their real estate at
estimated fair value and operating losses incurred on properties that were developed for sale by development joint ventures;
• Cash, cash equivalents and short-term investments — primarily due to declines in short-term interest rates; and
• Mortgage loans — primarily due to lower prepayments on commercial mortgage loans and lower yields on variable rate loans reflecting
declines in short-term interest rates.
Equity markets experienced some recovery in 2009, which led to improved yields on other limited partnership interests. As many of our
products are interest spread-based, the lower net investment income was significantly offset by lower interest credited expense on our
investment and insurance products.
The financial market conditions also resulted in a $348 million increase in net guaranteed annuity benefit costs in our Retirement Products
segment, as increased hedging losses were only partially offset by lower guaranteed benefit costs.
The key driver of the increase in other expenses stemmed from the impact of market conditions on certain expenses, primarily pension and
postretirement benefit costs, reinsurance expenses and letter of credit fees. These increases coupled with higher variable costs, such as
18 MetLife, Inc.