MetLife,
Inc. (“MetLife”) entered into a Stock Purchase Agreement,
dated as
of March 7, 2010, with
American International Group, Inc. (“AIG”) and ALICO Holdings LLC, pursuant to which MetLife agreed
to acquire all of the outstanding shares of capital stock of American Life Insurance Company and
Delaware American Life Insurance Company for consideration consisting of cash and MetLife
securities (the “Acquisition”). MetLife has revised its estimate of the effect of the Acquisition on its operating earnings per
share and operating return on equity and now expects the Acquisition to increase its 2011 operating
earnings per share by approximately $0.40 to $0.45 per share, and enable MetLife to increase
its estimated 2011 year-end operating return on equity by approximately 100 basis points.
Operating earnings per share does not include transition and other one-time expenses estimated at
$0.12 per share. The revision reflects an assumed issuance of 75 million shares of
common stock in a public offering at the July 30, 2010 closing price of $42.06 per share.
The business to be acquired in the Acquisition is referred to herein as the “Alico Business.” For
additional information concerning the proposed acquisition of the
Alico Business, see MetLife’s
Current Report on Form 8-K furnished on March 8, 2010 and its Current Report on Form 8-K filed on
March 11, 2010.
The
combined balance sheet of the Alico Business as of November 30, 2009, and the related
combined statements of income, equity and cash flows of the Alico Business for the year ended
November 30, 2009, together with the notes related thereto, included in Exhibit 99.1, and incorporated herein by reference, have been
furnished to MetLife by AIG.
The
unaudited condensed combined balance sheet of the Alico Business as
of May 31, 2010, and the
related unaudited condensed combined statements of income, equity and cash flows of the Alico Business for
the six months ended May 31, 2010, together with the notes related thereto, included in Exhibit 99.2, and incorporated herein by
reference, have been furnished to MetLife by AIG.
The
overview of the Acquisition, the overview of the Alico Business,
rationale for the Acquisition and related unaudited pro forma capsule financial
information, filed herewith as Exhibit 99.3, and incorporated herein by reference, discloses the
effect of the Acquisition and the financing transactions related
thereto on certain unaudited financial information of MetLife.
The unaudited pro forma capsule financial information is presented for informational purposes
only. The pro forma data is not necessarily indicative of the financial results that would have
been attained had the Acquisition occurred on and as of the dates
referenced above and should not be viewed as indicative of the operations or financial position of
the combined business in future periods.
The
unaudited pro forma capsule information is not presented in
accordance with Regulation S-X published by the Securities and Exchange Commission because MetLife is not yet
required to file the complete pro forma financial statements required by such regulation. This
information is based upon information furnished to MetLife by AIG. MetLife will file with
the Securities and Exchange Commission such complete unaudited pro forma financial statements
presented in accordance with the requirements of Regulation S-X no later than 71 calendar days after
the date that the initial report on Form 8-K disclosing the
completion of the Acquisition must be filed.
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Note
Regarding Forward-Looking Statements
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This disclosure may contain or
incorporate by reference information that includes or is based
upon forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements give expectations or forecasts of
future events. These statements can be identified by the fact
that they do not relate strictly to historical or current facts.
They use words such as “anticipate,”
“estimate,” “expect,” “project,”
“intend,” “plan,” “believe” and
other words and terms of similar meaning in connection with a
discussion of future operating or financial performance. In
particular, these include statements relating to future actions,
prospective services or products, future performance or results
of current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal
proceedings, trends in operations and financial results.
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Any or all forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties. Many such factors will be
important in determining MetLife’s actual future results.
These statements are based on current expectations and the
current economic environment. They involve a number of risks and
uncertainties that are difficult to predict. These statements
are not guarantees of future performance. Actual results could
differ materially from those expressed or implied in the
forward-looking statements. Risks, uncertainties, and other
factors that might cause such differences include the risks,
uncertainties and other factors identified in MetLife,
Inc.’s filings with the U.S. Securities and Exchange
Commission (the “SEC”). These factors include:
(1) any delay or failure to complete the acquisition of
American Life Insurance Company (“Alico”), a
subsidiary of ALICO Holdings LLC (“Alico Holdings”)
and Delaware American Life Insurance Company (“DelAm”)
(collectively, the “Acquisition”); (2) the
imposition of onerous conditions following the Acquisition;
(3) difficulties in integrating the business acquired in
the Acquisition (the “Alico Business”);
(4) uncertainty with respect to the outcome of the closing
agreement entered into between Alico and the United States
Internal Revenue Service in connection with the Acquisition;
(5) uncertainty with respect to the making of elections
under Section 338 of the U.S. Internal Revenue Code of
1986, as amended, and any benefits therefrom; (6) an
inability to manage the growth of the Alico Business; (7) a
writedown of the goodwill established in connection with the
Acquisition; (8) exchange rate fluctuations; (9) an
inability to predict the financial impact of the Acquisition on
MetLife’s business and financial results; (10) events
relating to American International Group, Inc. (“AIG”)
that could adversely affect the Alico Business or MetLife;
(11) the dilutive impact on MetLife, Inc.’s
stockholders resulting from the issuance of equity securities to
Alico Holdings in connection with the Acquisition; (12) a
decrease in MetLife, Inc.’s stock price as a result of
Alico Holdings’ ability to sell its equity securities;
(13) the conditional payment obligation of approximately
$300 million to Alico Holdings if the conversion of
MetLife, Inc.’s Series B Contingent Convertible Junior
Participating Non-Cumulative Perpetual Preferred Stock
(“Series B Preferred Stock”) issued to Alico
Holdings in connection with the Acquisition into MetLife,
Inc.’s common stock is not approved; (14) change of
control provisions in the Alico Business’ agreements;
(15) effects of guarantees within certain of the Alico
Business’ variable life and annuity products;
(16) regulatory action in the financial services industry
affecting the combined business; (17) financial instability
in Europe and possible writedowns of sovereign debt of European
nations; (18) difficult conditions in the global capital
markets; (19) increased volatility and disruption of the
capital and credit markets, which may affect MetLife’s
ability to seek financing or access its credit facilities;
(20) uncertainty about the effectiveness of the
U.S. government’s programs to stabilize the financial
system, the imposition of fees relating thereto, or the
promulgation of additional regulations; (21) impact of
comprehensive financial services regulation reform on MetLife;
(22) exposure to financial and capital market risk;
(23) changes in general economic conditions, including the
performance of financial markets and interest rates, which may
affect MetLife’s ability to raise capital, generate fee
income and market-related revenue and finance statutory reserve
requirements and may require MetLife to pledge collateral or
make payments related to declines in value of specified assets;
(24) potential liquidity and other risks resulting from
MetLife’s participation in a securities lending program and
other transactions; (25) investment losses and defaults,
and changes to investment valuations; (26) impairments of
goodwill and realized losses or market value impairments to
illiquid assets; (27) defaults on MetLife’s mortgage
loans; (28) the impairment of other financial institutions;
(29) MetLife’s ability to address unforeseen
liabilities, asset impairments or rating actions arising from
any future acquisitions, including the Acquisition, and to
successfully integrate acquired businesses with minimal disruption; (30) economic, political, currency and
other risks relating to MetLife’s international operations;
(31) MetLife, Inc.’s primary reliance, as a holding
company, on dividends from its subsidiaries to meet debt payment
obligations and the applicable regulatory restrictions on the
ability of the subsidiaries to pay such dividends;
(32) downgrades in MetLife, Inc.’s and its
affiliates’ claims paying ability, financial strength or
credit ratings; (33) ineffectiveness of risk management
policies and procedures; (34) availability and
effectiveness of reinsurance or indemnification arrangements, as
well as default or failure of counterparties to perform;
(35) discrepancies between actual claims experience and
assumptions used in setting prices for MetLife’s products
and establishing the liabilities for MetLife’s obligations
for future policy benefits and claims; (36) catastrophe
losses; (37) heightened competition, including with respect
to pricing, entry of new competitors, consolidation of
distributors, the development of new products by new and
existing competitors, distribution of amounts available under
U.S. government programs, and for personnel;
(38) unanticipated changes in industry trends;
(39) changes in accounting standards, practices
and/or
policies; (40) changes in assumptions related to deferred
policy acquisition costs (“DAC”), deferred sales
inducements (“DSI”), value of business acquired
(“VOBA”) or goodwill; (41) increased expenses
relating to pension and postretirement benefit plans, as well as
health care and other employee benefits; (42) exposure to
losses related to variable annuity guarantee benefits, including
from significant and sustained downturns or extreme volatility
in equity markets, reduced interest rates, unanticipated
policyholder behavior, mortality or longevity, and the
adjustment for nonperformance risk; (43) deterioration in
the experience of the “closed block” established in
connection with the reorganization of Metropolitan Life Insurance
Company; (44) adverse
results or other consequences from litigation, arbitration or
regulatory investigations; (45) discrepancies between
actual experience and assumptions used in establishing
liabilities related to other contingencies or obligations;
(46) regulatory, legislative or tax changes relating to
MetLife’s insurance, banking, international, or other
operations that may affect the cost of, or demand for,
MetLife’s products or services, impair its ability to
attract and retain talented and experienced management and other
employees, or increase the cost or administrative burdens of
providing benefits to employees; (47) the effects of
business disruption or economic contraction due to terrorism,
other hostilities, or natural catastrophes; (48) the
effectiveness of MetLife’s programs and practices in
avoiding giving its associates incentives to take excessive
risks; (49) other risks and uncertainties described from
time to time in MetLife, Inc.’s filings with the SEC; and
(50) any of the foregoing factors as they relate to the
Alico Business and its operations.
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MetLife, Inc. does not undertake any obligation to publicly
correct or update any forward-looking statement if MetLife, Inc.
later becomes aware that such statement is not likely to be
achieved. Please consult any further disclosures MetLife, Inc.
makes on related subjects in reports to the SEC.
MetLife, Inc. does not undertake any obligation to publicly
correct or update any forward-looking statement if MetLife, Inc.
later becomes aware that such statement is not likely to be
achieved. Please consult any further disclosures MetLife, Inc.
makes on related subjects in reports to the SEC.
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Non-GAAP and Other Financial Disclosures
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References to operating earnings, operating earnings per share and operating
return on equity should be read as operating earnings available to MetLife,
Inc.’s common shareholders, operating earnings available to MetLife, Inc.’s
common shareholders per diluted common share and operating return on common
equity, respectively.
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The historical and forward-looking financial information presented include
performance measures which are based on methodologies other than generally
accepted accounting principles (“GAAP”). MetLife, Inc. analyzes its performance
using financial measures, such as operating earnings, operating earnings
available to common shareholders, operating earnings available to common
shareholders per diluted common share and operating return on common equity,
that are not based on GAAP. MetLife believes the presentation of operating
earnings as MetLife measures it for management purposes enhances the
understanding of its performance by highlighting the results from operations
and the underlying profitability drivers of the business. Operating earnings,
operating earnings available to common shareholders, operating earnings
available to common shareholders per diluted common share and
operating return on common equity should not be viewed
as substitutes for GAAP net income (loss) from continuing operations, net of
income tax, GAAP net income (loss) available to MetLife, Inc.’s common
shareholders, GAAP net income (loss) available to MetLife, Inc.’s common
shareholders per diluted common share and return on common equity, respectively. Operating earnings is the
measure of segment profit or loss MetLife uses to evaluate segment performance
and allocate resources and, consistent with GAAP accounting guidance for
segment reporting, is MetLife’s measure of segment performance. Operating
earnings is also a measure by which MetLife senior management’s and many other
employees’ performance is evaluated for the purposes of determining their
compensation under applicable compensation plans.
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Operating earnings is defined as operating revenues less operating expenses,
net of income tax. Operating earnings available to common shareholders is
defined as operating earnings less preferred stock dividends, operating
earnings available to common shareholders per diluted common share is
calculated by dividing operating earnings available to common shareholders by
the number of weighted average diluted common shares outstanding for the period
indicated, and operating return on common equity is calculated as
operating earnings available to common shareholders divided by
average common stockholders’ equity.
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Operating revenues is defined as GAAP revenues (i) less net investment gains
(losses), (ii) less amortization of unearned revenue related to net investment
gains (losses), (iii) plus scheduled periodic settlement payments on
derivatives that are hedges of investments but do not qualify for hedge
accounting treatment, (iv) plus income from discontinued real estate operations
and (v) plus, for operating joint ventures reported under the equity method of
accounting, the aforementioned adjustments, those identified in the definition
of operating expenses and changes in fair value of hedges of operating joint
venture liabilities, all net of income tax.
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Operating expenses is defined as GAAP expenses (i) less changes in policyholder
benefits associated with asset value fluctuations related to experience-rated
contractholder liabilities and certain inflation-indexed liabilities, (ii) less
costs related to business combinations (since January 1, 2009) and
noncontrolling interests, (iii) less amortization of deferred policy
acquisition costs and value of business acquired and changes in the
policyholder dividend obligation related to net investment gains (losses) and
(iv) plus scheduled periodic settlement payments on derivatives that are hedges
of policyholder account balances but do not qualify for hedge accounting
treatment.
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In addition, operating revenues and operating expenses do not reflect the
consolidation of certain securitization vehicles that are variable interest
entities as required under GAAP.
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