METLIFE INC | 2013 | FY | 3

2. Segment Information
MetLife is organized into six segments, reflecting three broad geographic regions: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and EMEA. In addition, the Company reports certain of its results of operations in Corporate & Other, which includes MetLife Home Loans LLC (“MLHL”), the surviving, non-bank entity of the merger of MetLife Bank, National Association (“MetLife Bank”) with and into MLHL (see Note 3) and other business activities.
Americas
The Americas consists of the following segments:
Retail
The Retail segment offers a broad range of protection products and services and a variety of annuities to individuals and employees of corporations and other institutions, and is organized into two businesses: Life & Other and Annuities. Life & Other insurance products and services include variable life, universal life, term life and whole life products. Additionally, through broker-dealer affiliates, the Company offers a full range of mutual funds and other securities products. Life & Other products and services also include individual disability income products and personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. Annuities includes a variety of variable and fixed annuities which provide for both asset accumulation and asset distribution needs.
Group, Voluntary & Worksite Benefits
The Group, Voluntary & Worksite Benefits segment 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 two businesses: Group and Voluntary & Worksite. Group insurance products and services include variable life, universal life and term life products. Group insurance products and services also include dental, group short- and long-term disability and accidental death & dismemberment coverages. The Voluntary & Worksite business includes personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance offered to employees on a voluntary basis. The Voluntary & Worksite business also includes LTC, prepaid legal plans and critical illness products.
Corporate Benefit Funding
The Corporate Benefit Funding segment offers a broad range of annuity and investment products, including guaranteed interest products and other stable value products, income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This segment also includes structured settlements and certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to finance non-qualified benefit programs for executives.
Latin America
The Latin America segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident and health insurance, group medical, dental, credit insurance, endowment and retirement & savings products written in Latin America. Starting in the first quarter of 2013, the Latin America segment includes U.S. sponsored direct business, comprised of group and individual products sold through sponsoring organizations and affinity groups. Products included are life, dental, group short- and long-term disability, accidental death & dismemberment coverages, property & casualty and other accident and health coverages, as well as non-insurance products such as identity protection.
Asia
The Asia segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include whole life, term life, variable life, universal life, accident and health insurance, fixed and variable annuities, credit insurance and endowment products.
EMEA
The EMEA segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident and health insurance, credit insurance, annuities, endowment and retirement & savings products.
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments, external integration costs, internal resource costs for associates committed to acquisitions, enterprise-wide strategic initiative restructuring charges, and various start-up and certain run-off businesses. Start-up businesses include expatriate benefits insurance, as well as direct and digital marketing products. Corporate & Other also includes assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan. Under this in-force reinsurance agreement, the Company reinsures living and death benefit guarantees issued in connection with variable annuity products. Corporate & Other also includes our investment management business through which we offer fee-based investment management services to institutional clients. Additionally, Corporate & Other includes interest expense related to the majority of the Company’s outstanding debt and expenses associated with certain legal proceedings 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.
Financial Measures and Segment Accounting Policies
Operating earnings is the measure of segment profit or loss the Company uses to evaluate segment performance and allocate resources. Consistent with GAAP 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 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. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses). Operating expenses also excludes goodwill impairments.
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 or that are used to replicate certain 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 and other pass through adjustments, (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) acquisition and integration costs.
Operating earnings also excludes the recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the years ended December 31, 2013, 2012 and 2011 and at December 31, 2013 and 2012. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operating earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.
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 the Company’s business.
The Company’s 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.
For the Company’s domestic segments, net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.
Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.
 
 
Operating Earnings
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2013
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,528

 
$
15,250

 
$
2,859

 
$
2,824

 
$
27,461

 
$
7,801

 
$
2,297

 
$
116

 
$
37,675

 
$
(1
)
 
$
37,674

Universal life and investment-type product policy fees
 
4,912

 
688

 
247

 
991

 
6,838

 
1,722

 
386

 
139

 
9,085

 
366

 
9,451

Net investment income
 
7,898

 
1,856

 
5,790

 
1,246

 
16,790

 
2,915

 
498

 
381

 
20,584

 
1,648

 
22,232

Other revenues
 
1,018

 
418

 
278

 
23

 
1,737

 
92

 
97

 
28

 
1,954

 
(34
)
 
1,920

Net investment gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
161

 
161

Net derivative gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(3,239
)
 
(3,239
)
Total revenues
 
20,356

 
18,212

 
9,174

 
5,084

 
52,826

 
12,530

 
3,278

 
664

 
69,298

 
(1,099
)
 
68,199

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,028

 
14,227

 
5,402

 
2,454

 
31,111

 
5,755

 
1,039

 
63

 
37,968

 
1,398

 
39,366

Interest credited to policyholder account balances
 
2,331

 
155

 
1,233

 
417

 
4,136

 
1,690

 
147

 
42

 
6,015

 
2,164

 
8,179

Goodwill impairment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Capitalization of DAC
 
(1,309
)
 
(141
)
 
(27
)
 
(424
)
 
(1,901
)
 
(2,143
)
 
(714
)
 
(28
)
 
(4,786
)
 
—

 
(4,786
)
Amortization of DAC and VOBA
 
1,384

 
140

 
23

 
310

 
1,857

 
1,542

 
683

 
1

 
4,083

 
(533
)
 
3,550

Amortization of negative VOBA
 
—

 
—

 
—

 
(2
)
 
(2
)
 
(427
)
 
(95
)
 
—

 
(524
)
 
(55
)
 
(579
)
Interest expense on debt
 
—

 
1

 
9

 
—

 
10

 
—

 
1

 
1,148

 
1,159

 
123

 
1,282

Other expenses
 
5,084

 
2,380

 
523

 
1,612

 
9,599

 
4,312

 
1,810

 
894

 
16,615

 
520

 
17,135

Total expenses
 
16,518

 
16,762

 
7,163

 
4,367

 
44,810

 
10,729

 
2,871

 
2,120

 
60,530

 
3,617

 
64,147

Provision for income tax expense (benefit)
 
1,314

 
488

 
704

 
143

 
2,649

 
557

 
78

 
(925
)
 
2,359

 
(1,698
)
 
661

Operating earnings
 
$
2,524

 
$
962

 
$
1,307

 
$
574

 
$
5,367

 
$
1,244

 
$
329

 
$
(531
)
 
6,409

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
(1,099
)
 
 
 
 
Total expenses
 
(3,617
)
 
 
 
 
Provision for income tax (expense) benefit
 
1,698

 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
3,391

 
 
 
$
3,391

At December 31, 2013
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia (1)
 
EMEA
 
Corporate
& Other
 
Total
 
 
(In millions)
Total assets
 
$
349,516

 
$
43,404

 
$
220,612

 
$
69,874

 
$
119,717

 
$
33,382

 
$
48,791

 
$
885,296

Separate account assets
 
$
172,382

 
$
644

 
$
77,023

 
$
49,660

 
$
8,996

 
$
8,496

 
$
—

 
$
317,201

Separate account liabilities

$
172,382


$
644


$
77,023


$
49,660


$
8,996


$
8,496


$
—


$
317,201

______________
(1)
Total assets includes $98.4 billion of assets from the Japan operations which represents 11% of total consolidated assets.
 
 
Operating Earnings
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2012
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,532

 
$
14,794

 
$
3,237

 
$
2,578

 
$
27,141

 
$
8,344

 
$
2,370

 
$
56

 
$
37,911

 
$
64

 
$
37,975

Universal life and investment-type product policy fees
 
4,561

 
662

 
225

 
785

 
6,233

 
1,491

 
333

 
155

 
8,212

 
344

 
8,556

Net investment income
 
7,670

 
1,768

 
5,703

 
1,198

 
16,339

 
2,895

 
535

 
703

 
20,472

 
1,512

 
21,984

Other revenues
 
879

 
422

 
259

 
16

 
1,576

 
26

 
121

 
33

 
1,756

 
150

 
1,906

Net investment gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(352
)
 
(352
)
Net derivative gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,919
)
 
(1,919
)
Total revenues
 
19,642

 
17,646

 
9,424

 
4,577

 
51,289

 
12,756

 
3,359

 
947

 
68,351

 
(201
)
 
68,150

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,010

 
13,691

 
5,704

 
2,231

 
30,636

 
5,819

 
1,196

 
119

 
37,770

 
1,586

 
39,356

Interest credited to policyholder account balances
 
2,375

 
167

 
1,358

 
393

 
4,293

 
1,784

 
126

 
39

 
6,242

 
1,487

 
7,729

Goodwill impairment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,868

 
1,868

Capitalization of DAC
 
(1,753
)
 
(138
)
 
(29
)
 
(353
)
 
(2,273
)
 
(2,288
)
 
(723
)
 
—

 
(5,284
)
 
(5
)
 
(5,289
)
Amortization of DAC and VOBA
 
1,607

 
133

 
22

 
224

 
1,986

 
1,563

 
626

 
2

 
4,177

 
22

 
4,199

Amortization of negative VOBA
 
—

 
—

 
—

 
(5
)
 
(5
)
 
(456
)
 
(94
)
 
—

 
(555
)
 
(67
)
 
(622
)
Interest expense on debt
 
—

 
1

 
8

 
(1
)
 
8

 
5

 
1

 
1,176

 
1,190

 
166

 
1,356

Other expenses
 
5,369

 
2,351

 
478

 
1,375

 
9,573

 
4,738

 
1,810

 
559

 
16,680

 
1,431

 
18,111

Total expenses
 
16,608

 
16,205

 
7,541

 
3,864

 
44,218

 
11,165

 
2,942

 
1,895

 
60,220

 
6,488

 
66,708

Provision for income tax expense (benefit)
 
1,032

 
481

 
659

 
130

 
2,302

 
554

 
146

 
(679
)
 
2,323

 
(2,195
)
 
128

Operating earnings
 
$
2,002

 
$
960

 
$
1,224

 
$
583

 
$
4,769

 
$
1,037

 
$
271

 
$
(269
)
 
5,808

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
(201
)
 
 
 
 
Total expenses
 
(6,488
)
 
 
 
 
Provision for income tax (expense) benefit
 
2,195

 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
1,314

 
 
 
$
1,314

At December 31, 2012
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia (1)
 
EMEA
 
Corporate
& Other
 
Total
 
 
(In millions)
Total assets
 
$
332,387

 
$
44,138

 
$
217,352

 
$
23,272

 
$
131,138

 
$
23,474

 
$
65,020

 
$
836,781

Separate account assets
 
$
150,513

 
$
532

 
$
71,875

 
$
4,200

 
$
8,273

 
$
—

 
$
—

 
$
235,393

Separate account liabilities
 
$
150,513

 
$
532

 
$
71,875

 
$
4,200

 
$
8,273

 
$
—

 
$
—

 
$
235,393

______________
(1)
Total assets includes $111.0 billion of assets from the Japan operations which represents 13% of total consolidated assets.
 
 
Operating Earnings
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2011
 
Retail
 
Group,
Voluntary
& Worksite Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,711

 
$
13,949

 
$
2,848

 
$
2,514

 
$
26,022

 
$
7,716

 
$
2,477

 
$
54

 
$
36,269

 
$
92

 
$
36,361

Universal life and investment-type product policy fees
 
4,096

 
630

 
232

 
757

 
5,715

 
1,343

 
315

 
155

 
7,528

 
278

 
7,806

Net investment income
 
7,414

 
1,768

 
5,506

 
1,025

 
15,713

 
2,475

 
562

 
888

 
19,638

 
(53
)
 
19,585

Other revenues
 
779

 
390

 
249

 
15

 
1,433

 
36

 
123

 
60

 
1,652

 
880

 
2,532

Net investment gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(867
)
 
(867
)
Net derivative gains (losses)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
4,824

 
4,824

Total revenues
 
19,000

 
16,737

 
8,835

 
4,311

 
48,883

 
11,570

 
3,477

 
1,157

 
65,087

 
5,154

 
70,241

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,220

 
13,015

 
5,287

 
2,064

 
29,586

 
5,239

 
1,290

 
126

 
36,241

 
676

 
36,917

Interest credited to policyholder account balances
 
2,412

 
178

 
1,323

 
371

 
4,284

 
1,607

 
166

 
—

 
6,057

 
(454
)
 
5,603

Goodwill impairment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Capitalization of DAC
 
(2,339
)
 
(176
)
 
(25
)
 
(295
)
 
(2,835
)
 
(2,045
)
 
(669
)
 
—

 
(5,549
)
 
(9
)
 
(5,558
)
Amortization of DAC and VOBA
 
1,845

 
186

 
17

 
207

 
2,255

 
1,486

 
613

 
1

 
4,355

 
543

 
4,898

Amortization of negative VOBA
 
—

 
—

 
—

 
(6
)
 
(6
)
 
(560
)
 
(53
)
 
—

 
(619
)
 
(78
)
 
(697
)
Interest expense on debt
 
1

 
—

 
9

 
1

 
11

 
—

 
—

 
1,293

 
1,304

 
325

 
1,629

Other expenses
 
5,854

 
2,198

 
513

 
1,305

 
9,870

 
4,522

 
1,723

 
505

 
16,620

 
1,645

 
18,265

Total expenses
 
16,993

 
15,401

 
7,124

 
3,647

 
43,165

 
10,249

 
3,070

 
1,925

 
58,409

 
2,648

 
61,057

Provision for income tax expense (benefit)
 
672

 
445

 
599

 
150

 
1,866

 
441

 
156

 
(584
)
 
1,879

 
914

 
2,793

Operating earnings
 
$
1,335

 
$
891

 
$
1,112

 
$
514

 
$
3,852

 
$
880

 
$
251

 
$
(184
)
 
4,799

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
5,154

 
 
 
 
Total expenses
 
(2,648
)
 
 
 
 
Provision for income tax (expense) benefit
 
(914
)
 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
6,391

 
 
 
$
6,391

The following table presents total premiums, universal life and investment-type product policy fees and other revenues by major product groups of the Company’s segments, as well as Corporate & Other:
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
(In millions)
Life insurance (1)
$
32,176

 
$
31,723

 
$
30,486

Accident and health insurance
13,214

 
13,255

 
12,269

Property and casualty insurance
3,270

 
3,117

 
3,043

Non-insurance
385

 
342

 
901

Total
$
49,045

 
$
48,437

 
$
46,699

______________
(1)
Includes annuities and corporate benefit funding products.
Revenues derived from any customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2013, 2012 and 2011.
The following table presents total premiums, universal life and investment-type product policy fees and other revenues associated with the Company’s U.S. and foreign operations:
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
(In millions)
U.S.
$
32,529

 
$
31,500

 
$
30,108

Foreign:
 
 
 
 
 
Japan
7,373

 
7,833

 
7,184

Other
9,143

 
9,104

 
9,407

Total
$
49,045

 
$
48,437

 
$
46,699

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