MetLife 2010 Annual Report Download - page 117

The following pronouncements had no material impact on the Company’s consolidated financial statements:
• Effective January 1, 2009, the Company adopted guidance on determining whether an instrument (or embedded feature) is indexed to
an entity’s own stock. This guidance provides a framework for evaluating the terms of a particular instrument and whether such terms
qualify the instrument as being indexed to an entity’s own stock.
• Effective January 1, 2008, the Company adopted guidance on written loan commitments recorded at fair value through earnings. It
provides guidance on (i) incorporating expected net future cash flows when related to the associated servicing of a loan when
measuring fair value; and (ii) broadening the U.S. Securities and Exchange Commission (“SEC”) staff’s view that internally-developed
intangible assets should not be recorded as part of the fair value of a derivative loan commitment or to written loan commitments that are
accounted for at fair value through earnings. Internally-developed intangible assets are not considered a component of the related
instruments.
• Effective January 1, 2008, the Company prospectively adopted guidance on the sale of real estate when the agreement includes a buy-
sell clause. This guidance addresses whether the existence of a buy-sell arrangement would preclude partial sales treatment when real
estate is sold to a jointly owned entity and concludes that the existence of a buy-sell clause does not necessarily preclude partial sale
treatment under current guidance.
Future Adoption of New Accounting Pronouncements
In December 2010, the FASB issued new guidance addressing when a business combination should be assumed to have occurred for the
purpose of providing pro forma disclosure (Accounting Standards Update (“ASU”) 2010-29, Business Combinations (Topic 805): Disclosure
of Supplementary Pro Forma Information for Business Combinations). Under the new guidance, if an entity presents comparative financial
statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during
the current year had occurred as of the beginning of the comparable prior annual reporting period. The guidance also expands the
supplemental pro forma disclosures to include additional narratives. The guidance is effective for fiscal years beginning on or after
December 15, 2010. The Company will apply the guidance prospectively on its accounting for future acquisitions and does not expect
theadoptionofthisguidancetohaveamaterialimpacton the Company’s consolidated financial statements.
In December 2010, the FASB issued new guidance regarding goodwill impairment testing (ASU 2010-28, Intangibles — Goodwill and
Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts). This
guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units,
an entity would be required to perform Step 2 of the test if qualitative factors indicate that it is more likely than not that goodwill impairment
exists. The guidance is effective for the first quarter of 2011. The Company does not expect the adoption of this new guidance to have a
material impact on its consolidated financial statements.
In October 2010, the FASB issued new guidance regarding accounting for deferred acquisition costs (ASU 2010-26, Accounting for
Costs Associated with Acquiring or Renewing Insurance Contracts) effective for the first quarter of 2012. This guidance clarifies the costs that
should be deferred by insurance entities when issuing and renewing insurance contracts. The guidance also specifies that only costs related
directly to successful acquisition of new or renewal contracts can be capitalized. All other acquisition-related costs should be expensed as
incurred. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In April 2010, the FASB issued new guidance regarding accounting for investment funds determined to be VIEs (ASU 2010-15, How
Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments). Under this guidance, an
insurance entity would not be required to consolidate a voting-interest investment fund when it holds the majority of the voting interests of the
fund through its separate accounts. In addition, an insurance entity would not consider the interests held through separate accounts for the
benefit of policyholders in the insurer’s evaluation of its economics in a VIE, unless the separate account contractholder is a related party. The
guidance is effective for the first quarter of 2011. The Company does not expect the adoption of this new guidance to have a material impact
on its consolidated financial statements.
2. Acquisitions and Dispositions
2010 Acquisition of ALICO
Description of Transaction
On the Acquisition Date, MetLife, Inc. acquired all of the issued and outstanding capital stock of American Life from ALICO Holdings, a
subsidiary of AIG, and DelAm from AIG for a total purchase price of $16.4 billion, which consisted of (i) cash of $7.2 billion (includes settlement
of intercompany balances and certain other adjustments), and (ii) securities of MetLife, Inc. valued at $9.2 billion.
The $7.2 billion cash portion of the purchase price was funded through the issuance of common stock as described in Note 18, fixed and
floating rate senior debt as described in Note 11 as well as cash on hand. The securities issued to ALICO Holdings included
(a) 78,239,712 shares of MetLife, Inc.’s common stock; (b) 6,857,000 shares of Series B Contingent Convertible Junior Participating
Non-Cumulative Perpetual Preferred Stock (the “Convertible Preferred Stock”) of MetLife, Inc.; and (c) 40 million common equity units of
MetLife, Inc. (the “Equity Units”) with an aggregate stated amount at issuance of $3.0 billion, initially consisting of (i) three purchase contracts
(the “Series C Purchase Contracts,” the “Series D Purchase Contracts” and the “Series E Purchase Contracts” and, together, the “Purchase
Contracts”), obligating the holder to purchase, on specified future settlement dates, a variable number of shares of MetLife, Inc.’s common
stock for a fixed price; and (ii) an interest in each of three series of debt securities (the “Series C Debt Securities,” the “Series D Debt
Securities” and the “Series E Debt Securities,” and, together, the “Debt Securities”) issued by MetLife, Inc. Distributions on the Equity Units
will be made quarterly, through contract payments on the Purchase Contracts and interest payments on the Debt Securities, initially at an
aggregate annual rate of 5.00% (an average annual rate of 3.02% on the Purchase Contracts and an average annual rate of 1.98% on the Debt
Securities) as described in Note 14.
ALICO is an international life insurance company, providing consumers and businesses with products and services for life insurance,
accident and health insurance, retirement and wealth management solutions in 54 countries. The Acquisition will significantly broaden the
F-28 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)