MetLife 2011 Annual Report Download - page 201

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
claims, ending the year with a total of approximately 108,000 claims, and paid approximately $85.5 million for settlements reached in 2004 and prior
years. In 2003, MLIC received approximately 58,750 new claims, ending the year with a total of approximately 111,700 claims, and paid approximately
$84.2 million for settlements reached in 2003 and prior years. The number of asbestos cases that may be brought, the aggregate amount of any liability
that MLIC may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
The ability of MLIC to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability canbe
dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability
estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the
impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible
impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against MLIC when exposure to asbestos took place after the
dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.
The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the
Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the
Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income
may be necessary. To the extent the Company can estimate reasonably possible losses in excess of amounts accrued, it has been included in the
aggregate estimate of reasonably possible loss provided above. While the potential future charges could be material in the particular quarterly or annual
periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely
to have a material effect on the Company’s financial position.
The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses
for asbestos-related claims. MLIC’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently
known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already
asserted against MLIC, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted
against MLIC, but which MLIC believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims.
Significant assumptions underlying MLIC’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of
future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.
MLIC reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external
literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous
variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved
in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed
against it and other defendants and the jurisdictions in which claims are pending. As previously disclosed, in 2002 MLIC increased its recorded liability
for asbestos-related claims by $402 million from approximately $820 million to $1.2 billion. Based upon its regular reevaluation of its exposure from
asbestos litigation, MLIC has updated its liability analysis for asbestos-related claims through December 31, 2011.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries from state regulators, including state insurance commissioners; state
attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”); federal
governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”) seeking a broad range of
information. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.
MetLife Bank Mortgage Servicing Regulatory and Law Enforcement Authorities’ Inquiries. Since 2008, MetLife, through its affiliate, MetLife Bank,
has significantly increased its mortgage servicing activities by acquiring servicing portfolios. Currently, MetLife Bank services approximately 1% of the
aggregate principal amount of the mortgage loans serviced in the U.S. State and federal regulatory and law enforcement authorities have initiated
various inquiries, investigations or examinations of alleged irregularities in the foreclosure practices of the residential mortgage servicing industry.
Mortgage servicing practices have also been the subject of Congressional attention. Authorities have publicly stated that the scope of the investigations
extends beyond foreclosure documentation practices to include mortgage loan modification and loss mitigation practices.
MetLife Bank’s mortgage servicing has been the subject of recent inquiries and requests by state and federal regulatory and law enforcement
authorities. MetLife Bank is cooperating with the authorities’ review of this business. On April 13, 2011, the Office of the Comptroller of the Currency
(“OCC”) entered into consent decrees with several banks, including MetLife Bank. The consent decrees require an independent review of foreclosure
practices and set forth new residential mortgage servicing standards, including a requirement for a designated point of contact for a borrower during the
loss mitigation process. In addition, the Federal Reserve Board entered into consent decrees with the affiliated bank holding companies of these banks,
including MetLife, Inc., to enhance the supervision of the mortgage servicing activities of their banking subsidiaries. In a February 9, 2012 press release,
the Federal Reserve Board announced that it had issued monetary sanctions against five banking organizations for deficiencies in the organizations’
servicing of residential mortgage loans and processing of foreclosures. The Federal Reserve Board also stated that it plans to announce monetary
penalties against six other institutions under its supervision against whom it had issued enforcement actions in 2011 for deficiencies in servicing of
residential mortgage loans and processing foreclosures. The Federal Reserve Board did not identify these six institutions, but MetLife, Inc. is among the
institutions that entered into consent decrees with the Federal Reserve Board in 2011. MetLife Bank has also had a meeting with the Department of
Justice regarding mortgage servicing and foreclosure practices. It is possible that various state or federal regulatory and law enforcement authorities may
seek monetary penalties from MetLife Bank relating to foreclosure practices. MetLife Bank is responding to a subpoena issued by the New York State
Department of Financial Services regarding hazard insurance and flood insurance that MetLife Bank obtains to protect the lienholder’s interest when the
borrower’s insurance has lapsed.
These consent decrees, as well as the inquiries or investigations referred to above, could adversely affect MetLife’s reputation or result in material
fines, penalties, equitable remedies or other enforcement actions, and result in significant legal costs in responding to governmental investigations or
other litigation. In addition, the changes to the mortgage servicing business required by the consent decrees and the resolution of any other inquiries or
investigations may affect the profitability of such business. The Company is unable to estimate the reasonably possible loss or range of loss arising from
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