MetLife 2009 Annual Report Download - page 75

Subsequent Events
Dividends
On February 18, 2010, the Company’s Board of Directors announced dividends of $0.2500000 per share, for a total of $6 million, on its
Series A preferred shares, and $0.4062500 per share, for a total of $24 million, on its Series B preferred shares, subject to the final
confirmation that it has met the financial tests specified in the Series A and Series B preferred shares, which the Company anticipates will be
made on or about March 5, 2010, the earliest date permitted in accordance with the terms of the securities. Both dividends will be payable
March 15, 2010 to shareholders of record as of February 28, 2010.
Quantitative and Qualitative Disclosures About Market Risk
Risk Management
The Company must effectively manage, measure and monitor the market risk associated with its assets and liabilities. It has developed an
integrated process for managing risk, which it conducts through its Enterprise Risk Management Department, Asset/Liability Management
Unit, Treasury Department and Investment Department along with the management of the business segments. The Company has established
and implemented comprehensive policies and procedures at both the corporate and business segment level to minimize the effects of
potential market volatility.
The Company regularly analyzes its exposure to interest rate, equity market price and foreign currency exchange rate risks. As a result of
that analysis, the Company has determined that the estimated fair value of certain assets and liabilities are materially exposed to changes in
interest rates, foreign currency exchange rates and changes in the equity markets.
Enterprise Risk Management. MetLife has established several financial and non-financial senior management committees as part of its
risk management process. These committees manage capital and risk positions, approve asset/liability management strategies and establish
appropriate corporate business standards.
MetLife also has a separate Enterprise Risk Management Department, which is responsible for risk throughout MetLife and reports to
MetLife’s Chief Risk Officer. The Enterprise Risk Management Department’s primary responsibilities consist of:
• implementing a Board of Directors approved corporate risk framework, which outlines the Company’s approach for managing risk on an
enterprise-wide basis;
• developing policies and procedures for managing, measuring, monitoring and controlling those risks identified in the corporate risk
framework;
• establishing appropriate corporate risk tolerance levels;
• deploying capital on an economic capital basis; and
• reporting on a periodic basis to the Finance and Risk Policy Committee of the Company’s Board of Directors, and with respect to credit
risk to the Investment Committee of the Company’s Board of Directors and various financial and non-financial senior management
committees.
MetLife does not expect to make any material changes to its risk management practices in 2010.
Asset/Liability Management (“ALM”). The Company actively manages its assets using an approach that balances quality, diversification,
asset/liability matching, liquidity, concentration and investment return. The goals of the investment process are to optimize, net of income tax,
risk-adjusted investment income and risk-adjusted total return while ensuring that the assets and liabilities are reasonably managed on a cash
flow and duration basis. The asset/liability management process is the shared responsibility of the Financial Risk Management and Asset/
Liability Management Unit, Enterprise Risk Management, the Portfolio Management Unit, and the senior members of the operating business
segments and is governed by the ALM Committee. The ALM Committee’s duties include reviewing and approving target portfolios,
establishing investment guidelines and limits and providing oversight of the asset/liability management process on a periodic basis. The
directives of the ALM Committee are carried out and monitored through ALM Working Groups which are set up to manage by product type.
MetLife establishes target asset portfolios for each major insurance product, which represent the investment strategies used to profitably
fund its liabilities within acceptable levels of risk. These strategies are monitored through regular review of portfolio metrics, such as effective
duration, yield curve sensitivity, convexity, liquidity, asset sector concentration and credit quality by the ALM Working Groups. MetLife does
not expect to make any material changes to its asset/liability management practices in 2010.
Market Risk Exposures
The Company has exposure to market risk through its insurance operations and investment activities. For purposes of this disclosure,
“market risk” is defined as the risk of loss resulting from changes in interest rates, equity prices and foreign currency exchange rates.
Interest Rates. The Company’s exposure to interest rate changes results most significantly from its holdings of fixed maturity securities,
as well as its interest rate sensitive liabilities. The fixed maturity securities include U.S. and foreign government bonds, securities issued by
government agencies, corporate bonds and mortgage-backed securities, all of which are mainly exposed to changes in medium- and long-
term interest rates. The interest rate sensitive liabilities for purposes of this disclosure include debt, policyholder account balances related to
certain investment type contracts, and net embedded derivatives on variable annuities with guaranteed minimum benefits which have the
same type of interest rate exposure (medium- and long-term interest rates) as fixed maturity securities. The Company employs product
design, pricing and asset/liability management strategies to reduce the adverse effects of interest rate movements. Product design and
pricing strategies include the use of surrender charges or restrictions on withdrawals in some products and the ability to reset credited rates
for certain products. Asset/liability management strategies include the use of derivatives and duration mismatch limits. See “Risk Factors —
Changes in Market Interest Rates May Significantly Affect Our Profitability.”
Foreign Currency Exchange Rates. The Company’s exposure to fluctuations in foreign currency exchange rates against the U.S. Dollar
results from its holdings in non-U.S. Dollar denominated fixed maturity and equity securities, mortgage and consumer loans, and certain
liabilities, as well as through its investments in foreign subsidiaries. The principal currencies that create foreign currency exchange rate risk in
the Company’s investment portfolios are the Euro, and the Canadian dollar. The principal currencies that create foreign currency exchange
risk in the Company’s liabilities are the British pound, the Euro and the Swiss franc. Selectively, the Company uses U.S. Dollar assets to
support certain long duration foreign currency liabilities. Through its investments in foreign subsidiaries and joint ventures, the Company was
primarily exposed to the Mexican peso, the Japanese yen, the South Korean won, the Canadian dollar, the British pound, the Chilean peso,
69MetLife, Inc.