MetLife 2011 Annual Report Download - page 234

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
22. Business Segment Information
MetLife is organized into six segments: Insurance Products, Retirement Products, Corporate Benefit Funding and Auto & Home (collectively, “U.S.
Business”), and Japan and Other International Regions (collectively, “International”). The assets, liabilities and operating results relating to the Acquisition
are included in the Japan and Other International Regions segments. Prior year results have been adjusted to conform to the current year presentation.
In addition, the Company reports certain of its results of operations in Corporate & Other, which includes MetLife Bank and other business activities.On
November 21, 2011, MetLife, Inc. announced that it will be reorganizing its business into three broad geographic regions: The Americas; Europe, the
Middle East and Africa (“EMEA”); and Asia, and creating a global employee benefits business to better reflect its global reach. While the Company has
initiated certain changes in response to this announcement, management continued to evaluate the performance of the operating segments under the
existing segment structure as of December 31, 2011.
Insurance Products offers a broad range of protection products and services to individuals and corporations, as well as other institutions and their
respective employees, and is organized into three distinct businesses: Group Life, Individual Life and Non-Medical Health. Group Life insurance
products and services include variable life, universal life and term life products. Individual Life insurance products and services include variable life,
universal life, term life and whole life products. Non-Medical Health products and services include dental insurance, group short- and long-term
disability, individual disability income, LTC, critical illness and accidental death & dismemberment coverages. Retirement Products offers a variety of
variable and fixed annuities. Corporate Benefit Funding offers pension risk solutions, structured settlements, stable value and investment products and
other benefit funding products. Auto & Home provides personal lines property and casualty insurance, including private passenger automobile,
homeowners and personal excess liability insurance.
Japan life insurance products include whole life, term life, variable life and universal life products. Japan also provides accident and health insurance,
fixed and variable annuities and endowment products. These products are offered to both individuals and groups. Other International Regions provides
life insurance, accident and health insurance, credit life insurance, annuities, endowment and retirement & savings products to both individuals and
groups.
Corporate & Other contains the excess capital not allocated to the segments, external integration costs, internal resource costs for associates
committed to acquisitions and various start-up and run-off entities. Additionally, Corporate & Other includes interest expense related to the majority of
the Company’s outstanding debt, expenses associated with certain legal proceedings, the financial results of MetLife Bank (see Note 2) and income tax
audit issues. Corporate & Other also includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest
rates commensurate with related borrowings.
Operating earnings is the measure of segment profit or loss the Company uses to evaluate segment performance and allocate resources.
Consistent with GAAP accounting guidance for segment reporting, operating earnings is the Company’s measure of segment performance and is
reported below. Operating earnings should not be viewed as a substitute for GAAP income (loss) from continuing operations, net of income tax. The
Company believes the presentation of operating earnings as the Company measures it for management purposes enhances the understanding of its
performance by highlighting the results of operations and the underlying profitability drivers of the business.
Operating earnings is defined as operating revenues less operating expenses, both net of income tax.
Operating revenues and operating expenses exclude results of discontinued operations and other businesses that have been or will be sold or
exited by MetLife, Inc. (“Divested Businesses”). Operating revenues also excludes net investment gains (losses) and net derivative gains (losses).
The following additional adjustments are made to GAAP revenues, in the line items indicated, in calculating operating revenues:
‰Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and
net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”);
‰Net investment income: (i) includes amounts for scheduled periodic settlement payments and amortization of premium on derivatives that are
hedges of investments but do not qualify for hedge accounting treatment, (ii) includes income from discontinued real estate operations,
(iii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iv) excludes
certain amounts related to contractholder-directed unit-linked investments, and (v) excludes certain amounts related to securitization entities that
are VIEs consolidated under GAAP; and
‰Other revenues are adjusted for settlements of foreign currency earnings hedges.
The following additional adjustments are made to GAAP expenses, in the line items indicated, in calculating operating expenses:
‰Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment
gains (losses) and net derivative gains (losses), (ii) inflation-indexed benefit adjustments associated with contracts backed by inflation-indexed
investments and amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of
assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”), and (iv) market value adjustments associated with surrenders or
terminations of contracts (“Market Value Adjustments”);
‰Interest credited to policyholder account balances includes adjustments for scheduled periodic settlement payments and amortization of premium
on derivatives that are hedges of PABs but do not qualify for hedge accounting treatment and excludes amounts related to net investment income
earned on contractholder-directed unit-linked investments;
‰Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and
GMIB Costs, and (iii) Market Value Adjustments;
‰Amortization of negative VOBA excludes amounts related to Market Value Adjustments;
‰Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
‰Other expenses excludes costs related to: (i) noncontrolling interests, (ii) implementation of new insurance regulatory requirements, and
(iii) business combinations.
In 2011, management modified its definition of operating earnings to exclude the impacts of Divested Businesses, which includes certain operations
of MetLife Bank and the Caribbean Business, as these results are not relevant to understanding the Company’s ongoing operating results.
Consequently, prior years’ results for Corporate & Other and total consolidated operating earnings have been decreased by $111 million, net of $66
million of income tax, and $211 million, net of $139 million of income tax, for the years ended December 31, 2010 and 2009, respectively.
230 MetLife, Inc.