Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - BRIGHTHOUSE LIFE INSURANCE Co | d808859d8ka.htm |
| EX-99.1 - EX-99.1 - BRIGHTHOUSE LIFE INSURANCE Co | d808859dex991.htm |
| EX-99.2 - EX-99.2 - BRIGHTHOUSE LIFE INSURANCE Co | d808859dex992.htm |
Exhibit 99.3
MetLife Insurance Company of Connecticut
Unaudited Pro Forma Condensed Combined Financial Statements
In the second quarter of 2013, MetLife, Inc. announced its plans to merge three U.S.-based life insurance companies and an offshore reinsurance subsidiary to create one larger U.S.-based and U.S.-regulated life insurance company (the “Mergers”). The companies to be merged are MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company (“MLI-USA”), a wholly-owned subsidiary of MetLife Insurance Company of Connecticut, and MetLife Investors Insurance Company (“MLIIC”), each a U.S. insurance company that issues variable annuity products in addition to other products, and Exeter Reassurance Company, Ltd. (“Exeter”), a reinsurance company that mainly reinsures guarantees associated with variable annuity products. MetLife Insurance Company of Connecticut, which is expected to be renamed and domiciled in Delaware, will be the surviving company. Exeter, formerly a Cayman Islands company, was re-domesticated to Delaware in October 2013. Effective January 1, 2014, following receipt of New York State Department of Financial Services approval, MetLife Insurance Company of Connecticut withdrew its license to issue insurance policies and annuity contracts in New York. Also, effective January 1, 2014, MetLife Insurance Company of Connecticut reinsured with an affiliate all existing New York insurance policies and annuity contracts that include a separate account feature. Following the Mergers and subject to certain regulatory approvals, MetLife Insurance Company of Connecticut will likely enter into transactions to transfer to one or more affiliates certain business that is currently reinsured by Exeter. The Mergers are expected to occur in the fourth quarter of 2014, subject to regulatory approvals.
The unaudited pro forma condensed combined financial statements and accompanying notes present the impact of the Mergers as a transaction among entities under common control which is more fully described in the notes to the unaudited pro forma condensed combined financial statements. Transactions among entities under common control are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The unaudited pro forma condensed combined financial statements include historical audited amounts as of December 31, 2013 and for the years ended December 31, 2013, 2012 and 2011, for MetLife Insurance Company of Connecticut and its subsidiaries, including MLI-USA (collectively “MICC”), MLIIC and Exeter. The unaudited pro forma condensed combined financial statements give effect to the Mergers as if they had occurred (i) on December 31, 2013 for purposes of the unaudited pro forma condensed combined balance sheet and (ii) on January 1, 2011 for purposes of the unaudited pro forma condensed combined statements of operations for the years ended December 31, 2013, 2012 and 2011. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are directly attributable to the Mergers, factually supportable, and are expected to have a continuing impact on the combined results. It is likely that the actual adjustments reflected in the final accounting, that will consider additional available information, will differ from the pro forma adjustments and it is possible the differences may be material.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes. In addition, the unaudited proforma condensed combined financial statements were derived from and should be read in conjunction with the audited historical consolidated financial statements of MICC included in MetLife Insurance Company of Connecticut’s Annual Report on Form 10-K for the year ended December 31, 2013, as revised by MetLife Insurance Company of Connecticut’s Current Report on Form 8-K filed on October 27, 2014, as well as the audited historical balance sheets of MLIIC as of December 31, 2013 and 2012, and the related statements of operations, comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2013 together with the notes thereto and balance sheets of Exeter as of December 31, 2013 and 2012, and the related statements of operations, comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2013 together with the notes thereto, as restated on October 27, 2014, are included as Exhibits 99.1 and 99.2, respectively, to the Current Report on Form 8-K/A with which this financial information is filed as Exhibit 99.3.
1
The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not intended to reflect the results of operations or the financial position of the combined company that would have resulted had the Mergers been effective as of and during the periods presented or the results that may be obtained by the combined company in the future. The unaudited pro forma condensed combined financial statements as of and for the periods presented do not reflect future events that are not directly attributable to the Mergers and that may occur after the Mergers, including, but not limited to, expense efficiencies or revenue enhancements arising from the Mergers or management actions. Future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial statements.
2
MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 2013
(In millions, except per share data)
| Historical | ||||||||||||||||||||||||||
| MICC | MetLife Investors Insurance Company |
Exeter Reassurance Company Ltd. |
Reinsurance Adjustments |
Other Adjustments |
Notes | Pro Forma Combined |
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| Assets |
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| Investments: |
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| Fixed maturity securities available-for-sale, at estimated fair value |
$ | 45,252 | $ | 2,250 | $ | 1,321 | $ | (695 | ) | $ | — | 3(c) | $ | 48,128 | ||||||||||||
| Equity securities available-for-sale, at estimated fair value |
418 | 45 | — | — | — | 463 | ||||||||||||||||||||
| Mortgage loans, net; at estimated fair value |
7,718 | 286 | — | — | — | 8,004 | ||||||||||||||||||||
| Policy loans |
1,219 | 27 | — | — | — | 1,246 | ||||||||||||||||||||
| Real estate and real estate joint ventures |
754 | — | — | — | — | 754 | ||||||||||||||||||||
| Other limited partnership interests |
2,130 | 32 | — | — | — | 2,162 | ||||||||||||||||||||
| Short-term investments, principally at estimated fair value |
2,107 | 75 | 2,781 | (7 | ) | — | 3(c) | 4,956 | ||||||||||||||||||
| Derivative assets |
— | — | 2,376 | — | (2,376 | ) | 4(a) | — | ||||||||||||||||||
| Funds withheld at interest |
— | — | 2,694 | — | (2,694 | ) | 4(a) | — | ||||||||||||||||||
| Other invested assets, principally at estimated fair value |
2,555 | 68 | — | (2,768 | ) | 4,570 | 3(a)-(c), 4(a), 5(a) |
4,425 | ||||||||||||||||||
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| Total investments |
62,153 | 2,783 | 9,172 | (3,470 | ) | (500 | ) | 70,138 | ||||||||||||||||||
| Cash and cash equivalents, principally at estimated fair value |
746 | 24 | 630 | (604 | ) | — | 3(a), (c) | 796 | ||||||||||||||||||
| Accrued investment income |
542 | 26 | 94 | (29 | ) | (2 | ) | 3(c), 5(a) | 631 | |||||||||||||||||
| Premiums, reinsurance and other receivables |
20,609 | 1,829 | 646 | (3,170 | ) | — | 3(a)-(c) | 19,914 | ||||||||||||||||||
| Deferred policy acquisition costs and value of business acquired |
4,730 | 291 | 160 | 707 | — | 3(b), (c) | 5,888 | |||||||||||||||||||
| Current income tax recoverable |
192 | 9 | 197 | — | — | 398 | ||||||||||||||||||||
| Deferred income tax recoverable |
— | — | 1,529 | — | (1,529 | ) | 4(b) | — | ||||||||||||||||||
| Goodwill |
493 | — | — | — | 33 | 4(c) | 526 | |||||||||||||||||||
| Other assets |
794 | 110 | — | 34 | (33 | ) | 3(b), 4(c) | 905 | ||||||||||||||||||
| Separate account assets |
97,780 | 12,033 | — | — | — | 109,813 | ||||||||||||||||||||
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| Total assets |
$ | 188,039 | $ | 17,105 | $ | 12,428 | $ | (6,532 | ) | $ | (2,031 | ) | $ | 209,009 | ||||||||||||
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| Liabilities and Stockholders’ Equity |
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| Liabilities |
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| Future policy benefits |
$ | 27,991 | $ | 501 | $ | 2,747 | $ | (1,455 | ) | $ | 12 | 3(b), (c), 4(d) |
$ | 29,796 | ||||||||||||
| Policyholder account balances |
33,453 | 2,748 | 2,489 | (1,262 | ) | — | 3(c) | 37,428 | ||||||||||||||||||
| Other policy-related balances |
3,164 | 102 | 2,170 | (2,973 | ) | 4 | 3(b), (c), 4(d) |
2,467 | ||||||||||||||||||
| Policyholder dividends payable |
— | — | 16 | — | (16 | ) | 4(d) | — | ||||||||||||||||||
| Payables for collateral under securities loaned and other transactions |
6,451 | 266 | — | — | 197 | 4(e) | 6,914 | |||||||||||||||||||
| Long-term debt |
2,251 | — | 575 | — | (500 | ) | 5(a) | 2,326 | ||||||||||||||||||
| Deferred income tax liability |
1,385 | 192 | — | 272 | (1,529 | ) | 3(b), 4(b) | 320 | ||||||||||||||||||
| Derivative liabilities |
— | — | 2,648 | — | (2,648 | ) | 4(f) | — | ||||||||||||||||||
| Other liabilities |
6,776 | 94 | 553 | (1,560 | ) | 2,449 | 3(a)-(c), 4(e), 4(f), 5(a) |
8,312 | ||||||||||||||||||
| Separate account liabilities |
97,780 | 12,033 | — | — | — | 109,813 | ||||||||||||||||||||
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| Total liabilities |
179,251 | 15,936 | 11,198 | (6,978 | ) | (2,031 | ) | 197,376 | ||||||||||||||||||
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| Stockholders’ Equity |
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| Preferred stock |
— | — | — | — | — | — | ||||||||||||||||||||
| Common stock, par value $2.50 per share |
86 | 6 | — | — | — | 92 | ||||||||||||||||||||
| Additional paid-in capital |
6,737 | 636 | 4,126 | — | — | 11,499 | ||||||||||||||||||||
| Retained earnings (accumulated deficit) |
1,076 | 504 | (2,965 | ) | 506 | — | 3(b) | (879 | ) | |||||||||||||||||
| Accumulated other comprehensive income (loss) |
889 | 23 | 69 | (60 | ) | — | 3(c) | 921 | ||||||||||||||||||
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| Total stockholders’ equity |
8,788 | 1,169 | 1,230 | 446 | — | 11,633 | ||||||||||||||||||||
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| Total liabilities and stockholders’ equity |
$ | 188,039 | $ | 17,105 | $ | 12,428 | $ | (6,532 | ) | $ | (2,031 | ) | $ | 209,009 | ||||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial statements.
3
MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year End December 31, 2013
(In millions)
| Historical | ||||||||||||||||||||||||||
| MICC | MetLife Investors Insurance Company |
Exeter Reassurance Company Ltd. |
Reinsurance Adjustments |
Other Adjustments |
Notes | Pro Forma Combined |
||||||||||||||||||||
| Revenues |
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| Premiums |
$ | 606 | $ | 29 | $ | 59 | $ | (5 | ) | $ | — | 3(b) | $ | 689 | ||||||||||||
| Universal life and investment-type product policy fees |
2,336 | 202 | 587 | (177 | ) | — | 3(b), (c) | 2,948 | ||||||||||||||||||
| Net investment income |
2,852 | 114 | 35 | (16 | ) | (2 | ) | 3(c), 5(a) | 2,983 | |||||||||||||||||
| Fees on ceded reinsurance and other |
— | 90 | — | — | (90 | ) | 4(g) | — | ||||||||||||||||||
| Other revenues |
592 | — | 2 | (74 | ) | 90 | 3(b), (c), 4(g) | 610 | ||||||||||||||||||
| Net investment gains (losses): |
||||||||||||||||||||||||||
| Other-than-temporary impairments on fixed maturity securities |
(9 | ) | — | — | — | — | (9 | ) | ||||||||||||||||||
| Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) |
(11 | ) | — | — | — | — | (11 | ) | ||||||||||||||||||
| Other net investment gains (losses) |
102 | 1 | (57 | ) | 59 | (45 | ) | 3(c), 5(b) | 60 | |||||||||||||||||
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| Total net investment gains (losses) |
82 | 1 | (57 | ) | 59 | (45 | ) | 40 | ||||||||||||||||||
| Net derivative gains (losses) |
(1,052 | ) | (442 | ) | 1,935 | 375 | — | 3(c) | 816 | |||||||||||||||||
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| Total revenues |
5,416 | (6 | ) | 2,561 | 162 | (47 | ) | 8,086 | ||||||||||||||||||
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| Expenses |
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| Policyholder benefits and claims |
1,707 | 48 | 1,380 | (44 | ) | 27 | 3(b), (c), 4(h) | 3,118 | ||||||||||||||||||
| Interest credited to policyholder account balances |
1,037 | 113 | 17 | (17 | ) | — | 3(c) | 1,150 | ||||||||||||||||||
| Policyholder dividends |
— | — | 27 | — | (27 | ) | 4(h) | — | ||||||||||||||||||
| Goodwill impairment |
66 | — | — | — | — | 66 | ||||||||||||||||||||
| Other expenses |
1,659 | (11 | ) | 101 | 215 | (2 | ) | 3(b)-(d), 5(a) | 1,962 | |||||||||||||||||
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| Total expenses |
4,469 | 150 | 1,525 | 154 | (2 | ) | 6,296 | |||||||||||||||||||
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| Income (loss) from continuing operations before provision for income tax |
947 | (156 | ) | 1,036 | 8 | (45 | ) | 1,790 | ||||||||||||||||||
| Provision for income tax expense (benefit) |
227 | (67 | ) | 364 | 3 | (16 | ) | 3(e), 5(c) | 511 | |||||||||||||||||
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| Income from continuing operations, net of income tax |
$ | 720 | $ | (89 | ) | $ | 672 | $ | 5 | $ | (29 | ) | $ | 1,279 | ||||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial statements.
4
MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year End December 31, 2012
(In millions)
| Historical | ||||||||||||||||||||||||||
| MICC | MetLife Investors Insurance Company |
Exeter Reassurance Company Ltd. |
Reinsurance Adjustments |
Other Adjustments |
Notes | Pro Forma Combined |
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| Revenues |
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| Premiums |
$ | 1,261 | $ | 11 | $ | 950 | $ | (888 | ) | $ | — | 3(b),(c) | $ | 1,334 | ||||||||||||
| Universal life and investment-type product policy fees |
2,261 | 198 | 548 | (183 | ) | — | 3(b),(c) | 2,824 | ||||||||||||||||||
| Net investment income |
2,952 | 113 | 21 | (2 | ) | (26 | ) | 3(c), 5(a) | 3,058 | |||||||||||||||||
| Fees on ceded reinsurance and other |
— | 93 | — | — | (93 | ) | 4(g) | — | ||||||||||||||||||
| Other revenues |
511 | — | 23 | (24 | ) | 93 | 3(c), 4(g) | 603 | ||||||||||||||||||
| Net investment gains (losses): |
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| Other-than-temporary impairments on fixed maturity securities |
(52 | ) | (2 | ) | — | — | — | (54 | ) | |||||||||||||||||
| Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) |
3 | — | — | — | — | 3 | ||||||||||||||||||||
| Other net investment gains (losses) |
201 | (2 | ) | 42 | (37 | ) | — | 3(c) | 204 | |||||||||||||||||
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| Total net investment gains (losses) |
152 | (4 | ) | 42 | (37 | ) | — | 153 | ||||||||||||||||||
| Net derivative gains (losses) |
1,003 | 329 | (3,677 | ) | 1,432 | — | 3(c) | (913 | ) | |||||||||||||||||
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| Total revenues |
8,140 | 740 | (2,093 | ) | 298 | (26 | ) | 7,059 | ||||||||||||||||||
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| Expenses |
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| Policyholder benefits and claims |
2,389 | 100 | 1,812 | (1,001 | ) | 30 | 3(b),(c), 4(h) | 3,330 | ||||||||||||||||||
| Interest credited to policyholder account balances |
1,147 | 118 | 17 | (17 | ) | — | 3(c) | 1,265 | ||||||||||||||||||
| Policyholder dividends |
— | — | 30 | — | (30 | ) | 4(h) | — | ||||||||||||||||||
| Goodwill impairment |
394 | — | — | — | — | 394 | ||||||||||||||||||||
| Other expenses |
2,720 | 229 | 206 | (709 | ) | (26 | ) | 3(b)-(d), 5(a) | 2,420 | |||||||||||||||||
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| Total expenses |
6,650 | 447 | 2,065 | (1,727 | ) | (26 | ) | 7,409 | ||||||||||||||||||
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| Income (loss) from continuing operations before provision for income tax |
1,490 | 293 | (4,158 | ) | 2,025 | — | (350 | ) | ||||||||||||||||||
| Provision for income tax expense (benefit) |
372 | 94 | (1,455 | ) | 709 | — | 3(e), 5(c) | (280 | ) | |||||||||||||||||
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| Income (loss) from continuing operations, net of income tax |
$ | 1,118 | $ | 199 | $ | (2,703 | ) | $ | 1,316 | $ | — | $ | (70 | ) | ||||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial statements.
5
MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year End December 31, 2011
(In millions)
| Historical | ||||||||||||||||||||||||||
| MICC | MetLife Investors Insurance Company |
Exeter Reassurance Company Ltd. |
Reinsurance Adjustments |
Other Adjustments |
Notes | Pro Forma Combined |
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| Revenues |
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| Premiums |
$ | 1,828 | $ | 7 | $ | 72 | $ | (9 | ) | $ | — | 3(b) | $ | 1,898 | ||||||||||||
| Universal life and investment-type product policy fees |
1,956 | 204 | 433 | (136 | ) | — | 3(b),(c) | 2,457 | ||||||||||||||||||
| Net investment income |
3,074 | 114 | 17 | 3 | (9 | ) | 3(c), 5(a) | 3,199 | ||||||||||||||||||
| Fees on ceded reinsurance and other |
— | 104 | — | — | (104 | ) | 4(g) | — | ||||||||||||||||||
| Other revenues |
508 | — | 44 | (55 | ) | 104 | 3(b),(c), 4(g) | 601 | ||||||||||||||||||
| Net investment gains (losses): |
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| Other-than-temporary impairments on fixed maturity securities |
(42 | ) | — | — | — | — | (42 | ) | ||||||||||||||||||
| Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) |
(5 | ) | — | — | — | — | (5 | ) | ||||||||||||||||||
| Other net investment gains (losses) |
82 | (5 | ) | (1 | ) | — | — | 76 | ||||||||||||||||||
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| Total net investment gains (losses) |
35 | (5 | ) | (1 | ) | — | — | 29 | ||||||||||||||||||
| Net derivative gains (losses) |
1,096 | 326 | 230 | (787 | ) | — | 3(c) | 865 | ||||||||||||||||||
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| Total revenues |
8,497 | 750 | 795 | (984 | ) | (9 | ) | 9,049 | ||||||||||||||||||
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| Expenses |
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| Policyholder benefits and claims |
2,660 | 59 | 309 | (88 | ) | 31 | 3(b),(c), 4(h) | 2,971 | ||||||||||||||||||
| Interest credited to policyholder account balances |
1,189 | 127 | 16 | (16 | ) | — | 3(c) | 1,316 | ||||||||||||||||||
| Policyholder dividends |
— | — | 31 | — | (31 | ) | 4(h) | — | ||||||||||||||||||
| Other expenses |
2,981 | 259 | 170 | (101 | ) | (9 | ) | 3(b)-(d), 5(a) | 3,300 | |||||||||||||||||
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| Total expenses |
6,830 | 445 | 526 | (205 | ) | (9 | ) | 7,587 | ||||||||||||||||||
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| Income (loss) from continuing operations before provision for income tax |
1,667 | 305 | 269 | (779 | ) | — | 1,462 | |||||||||||||||||||
| Provision for income tax expense (benefit) |
493 | 90 | 94 | (272 | ) | — | 3(e), 5(c) | 405 | ||||||||||||||||||
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| Income (loss) from continuing operations, net of income tax |
$ | 1,174 | $ | 215 | $ | 175 | $ | (507 | ) | $ | — | $ | 1,057 | |||||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial statements.
6
MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of Transaction
In the second quarter of 2013, MetLife, Inc. announced its plans to merge three U.S.-based life insurance companies and an offshore reinsurance subsidiary to create one larger U.S.-based and U.S.-regulated life insurance company (the “Mergers”). The companies to be merged are MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company (“MLI-USA”), a wholly-owned subsidiary of MetLife Insurance Company of Connecticut, and MetLife Investors Insurance Company (“MLIIC”), each a U.S. insurance company that issues variable annuity products in addition to other products, and Exeter Reassurance Company, Ltd. (“Exeter”), a reinsurance company that mainly reinsures guarantees associated with variable annuity products. MetLife Insurance Company of Connecticut, which is expected to be renamed and domiciled in Delaware, will be the surviving company. Exeter, formerly a Cayman Islands company, was re-domesticated to Delaware in October 2013. Effective January 1, 2014, following receipt of New York State Department of Financial Services approval, MetLife Insurance Company of Connecticut withdrew its license to issue insurance policies and annuity contracts in New York. Also, effective January 1, 2014, MetLife Insurance Company of Connecticut reinsured with an affiliate all existing New York insurance policies and annuity contracts that include a separate account feature. Following the Mergers and subject to certain regulatory approvals, MetLife Insurance Company of Connecticut will likely enter into transactions to transfer to one or more affiliates certain business that is currently reinsured by Exeter. The Mergers are expected to occur in the fourth quarter of 2014, subject to regulatory approvals.
2. Basis of Presentation
The Mergers represent a transaction among entities under common control. Transactions among entities under common control are accounted for as if the transaction occurred at the beginning of the earliest date presented and prior years are retrospectively adjusted to furnish comparative information similar to the pooling method. The unaudited pro forma condensed combined financial statements include historical amounts derived from the audited financial statements as of December 31, 2013 and for the years ended December 31, 2013, 2012 and 2011, for MetLife Insurance Company of Connecticut and its subsidiaries, including MLI-USA (collectively “MICC”), MLIIC and Exeter. The unaudited pro forma condensed combined financial statements give effect to the Mergers as if they had occurred (i) on December 31, 2013 for purposes of the unaudited pro forma condensed combined balance sheet and (ii) on January 1, 2011 for purposes of the unaudited pro forma condensed combined statements of operations for the years ended December 31, 2013, 2012 and 2011.
The unaudited pro forma condensed combined financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and presented in accordance with the requirements of Article 11 of Regulation S-X published by the U.S. Securities and Exchange Commission. In accordance with Article 11 of Regulation S-X, discontinued operations have been excluded from the presentation of the unaudited pro forma condensed combined statements of operations.
The historical financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are directly attributable to the Mergers, factually supportable, and are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial statements exclude the effects of adjustments that rely on highly judgmental estimates including how historical management practices and operating decisions may or may not have changed as a result of the Mergers.
The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not intended to reflect the results of operations or the financial position of the combined company that
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MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (CONTINUED)
would have resulted had the Mergers been effective during the periods presented or the results that may be obtained by the combined company in the future.
These unaudited pro forma condensed combined financial statements should be read in conjunction with the audited historical consolidated financial statements of MICC included in MetLife Insurance Company of Connecticut’s Annual Report on Form 10-K for the year ended December 31, 2013, as revised by MetLife Insurance Company of Connecticut’s Current Report on Form 8-K filed on October 27, 2014, as well as the audited historical balance sheets of MLIIC as of December 31, 2013 and 2012, and the related statements of operations, comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2013 together with the notes thereto and balance sheets of Exeter as of December 31, 2013 and 2012, and the related statements of operations, comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2013 together with the notes thereto, as restated on October 27, 2014, are included as Exhibits 99.1 and 99.2, respectively, to the Current Report on Form 8-K/A with which this financial information is filed as Exhibit 99.3.
3. Reinsurance Adjustments
In connection with the Mergers, adjustments have been included for new and planned reinsurance agreements, for the recapture of certain reinsurance agreements and to eliminate non-recurring bank fees. The total of the reinsurance adjustments at December 31, 2013 resulted in changes to total assets of ($6,532) million, total liabilities of ($6,978) million, and total stockholders’ equity of $446 million and for the years ended December 31, 2013, 2012 and 2011 resulted in changes to total revenues of $162 million, $298 million and ($984) million, respectively, and to total expenses of $154 million, ($1,727) million, and ($205) million, respectively.
| (a) | Adjustment to increase total assets and total liabilities by $97 million to record a new reinsurance agreement. Effective January 1, 2014, MetLife Insurance Company of Connecticut reinsured with Metropolitan Life Insurance Company, an affiliate, all existing New York insurance policies and annuity contracts that include a separate account feature. The new reinsurance agreement was entered into in connection with MetLife Insurance Company of Connecticut withdrawing its license to issue insurance policies and annuity contracts in New York. |
| (b) | Adjustment to eliminate reinsurance transactions among the merging companies. The adjustments at December 31, 2013 include: changes of ($4,045) million to total assets, ($4,551) million to total liabilities and $506 million to retained earnings. The adjustments for the years ended December 31, 2013, 2012 and 2011 include: reductions to total revenue of $73 million, $0 and $12 million, respectively, and changes to other expenses of $208 million, ($690) million and ($61) million, respectively. |
| (c) | Adjustment to reflect planned reinsurance transactions to transfer to one or more affiliates certain business that is currently reinsured by Exeter. The adjustments at December 31, 2013 include: reductions of $2,584 million to total assets, $2,524 million to total liabilities and $60 million to accumulated other comprehensive income (loss). The adjustments for the years ended December 31, 2013, 2012 and 2011 include: changes to total revenue of $235 million, $298 million and ($972) million, respectively, and reductions to other expenses of $37 million, $1,018 million and $119 million, respectively. |
| (d) | Adjustment to eliminate from other expenses non-recurring credit facility usage fees for letters of credit, which were held to collateralize assumed liabilities and which were canceled when Exeter re-domesticated to Delaware of $17 million, $19 million and $25 million, for the years ended December 31, 2013, 2012 and 2011, respectively. |
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MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (CONTINUED)
| (e) | Adjustment for the income tax impact for all reinsurance adjustments at the federal statutory tax rate of 35%. |
4. Reclassification Adjustments
Reclassification adjustments, included in other adjustments, are reflected herein to conform the presentation of Exeter’s and MLIIC’s financial statements to the presentation of MICC’s financial statements.
| (a) | Adjustment to reclassify derivative assets of $2,376 million and funds withheld at interest of $2,694 million to other invested assets. |
| (b) | Adjustment to net deferred income tax recoverable of $1,529 million with deferred income tax liability. |
| (c) | Adjustment to reclassify goodwill of $33 million from other assets to goodwill. |
| (d) | Adjustment to reclassify policyholder dividends payable of $12 million and $4 million to future policy benefits and other policy-related balances, respectively. |
| (e) | Adjustment to reclassify cash collateral on deposit of $197 million from other liabilities to payables for collateral under securities loaned and other transactions. |
| (f) | Adjustment to reclassify derivative liabilities of $2,648 million to other liabilities. |
| (g) | Adjustment to reclassify fees on ceded reinsurance and other of $90 million, $93 million and $104 million to other revenues for the years ended December 31, 2013, 2012 and 2011, respectively. |
| (h) | Adjustment to reclassify policyholder dividends of $27 million, $30 million and $31 million to policyholder benefits and claims for the years ended December 31, 2013, 2012 and 2011, respectively. |
5. Other Adjustments
The following other pro forma adjustments have been recorded in the unaudited pro forma condensed combined financial statements.
| (a) | Adjustments to eliminate related party debt transactions among the merging entities. The adjustments at December 31, 2013 include: reductions of $2 million to accrued investment income and other liabilities and reductions of $500 million to other invested assets and long-term debt. The adjustments for the year ended December 31, 2013, 2012 and 2011 include: reductions of $2 million, $26 million and $9 million, respectively, to net investment income and other expenses. |
| (b) | Adjustment to eliminate related party investment gains for the year ended December 31, 2013. The non-recurring gains were recorded in connection with establishing a custodial account when MetLife Insurance Company of Connecticut withdrew its license to issue insurance policies and annuity contracts in New York. |
| (c) | Adjustment for the income tax impact for all other adjustments at the federal statutory tax rate of 35%. |
6. Forward Looking Statements
These unaudited pro forma condensed combined financial statements may be deemed to be forward looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward looking statements are identified by words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Such statements may include, but are not limited to statements about the benefits of the Mergers, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements
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MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (CONTINUED)
that are not historical facts. These forward looking statements are based largely on management’s expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward looking statements.
7. Subsequent Event
On February 14, 2014, a subsidiary of MetLife Insurance Company of Connecticut entered into a definitive agreement to sell its wholly-owned subsidiary, MetLife Assurance Limited (“MAL”). Beginning in the first quarter of 2014, MICC will account for and report MAL as discontinued operations. These unaudited pro forma condensed combined financial statements exclude the impact of the MAL disposition as the transaction does not meet the significant subsidiary conditions of Article 11 of Regulation S-X and is not directly attributable to the Mergers. The transaction is expected to close in the second quarter of 2014, subject to regulatory approvals and satisfaction of other closing conditions.
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