MetLife 2013 Annual Report Download - page 27

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. On a quarterly and annual basis, we review relevant information with respect to liabilities for litigation, regulatory investigations and
litigation-related contingencies to be reflected in our consolidated financial statements. It is possible that an adverse outcome in certain of our litigation
and regulatory investigations, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could
have a material effect upon our consolidated net income or cash flows in particular quarterly or annual periods.
See Note 21 of the Notes to the Consolidated Financial Statements for additional information regarding our assessment of litigation contingencies.
Economic Capital
Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis
upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in our business.
Our economic capital model aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-
based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required
economic capital shock factors to a specific confidence level and time horizon and applying an industry standard method for the inclusion of
diversification benefits among risk types. Economic capital-based risk estimation is an evolving science and industry best practices have emerged and
continue to evolve. Areas of evolving industry best practices include stochastic liability valuation techniques, alternative methodologies for the calculation
of diversification benefits, and the quantification of appropriate shock levels. MetLife management is responsible for the on-going production and
enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice
standards.
For our domestic segments, net investment income is credited or charged based on the level of allocated equity; however, changes in allocated
equity do not impact our consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.
Acquisitions and Dispositions
On December 19, 2013, MetLife, Inc. reached an agreement with Malaysia’s AMMB Holdings Bhd (“AMMB”) to seek regulatory approval of a
proposed strategic partnership involving AmLife Insurance Berhad (“AmLife”) and AmFamily Takaful Berhad (“AmTakaful”). As a result of the proposed
transaction, upon receipt of regulatory approvals and satisfaction of certain other conditions, MetLife and AMMB would each hold approximately a 50%
interest in both AmLife and AmTakaful. In addition, the proposed transaction will result in AmLife and AmTakaful entering into exclusive 20-year
bancassurance and bancatakaful agreements for the distribution of life insurance and family takaful products through the distribution network of AMMB’s
banking subsidiaries in Malaysia.
On September 26, 2013, MetLife, Inc., Bank for Investment & Development of Vietnam (“BIDV”), and Bank for Investment and Development of
Vietnam Insurance Corporation (“BIC”) signed an agreement to establish a life insurance joint venture in Vietnam. Under the terms of the agreement,
MetLife will hold a 60% stake in the new company and BIDV and BIC will own the remaining 40% stake. The joint venture will initially focus on offering life
and health insurance products and includes an exclusive bancassurance distribution agreement between the joint venture and BIDV. The joint venture is
expected to start operations in 2014 subject to certain regulatory approvals.
See Notes 3 and 23 of the Notes to the Consolidated Financial Statements for additional information.
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