Summary
MetLife Inc. (MET) has filed an 8-K to disclose the financial impact of the recently enacted Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. These legislative changes, signed into law in March 2010, will reduce the tax deductibility of retiree health care costs for MetLife, specifically by limiting the deductibility to the extent of any Medicare Part D subsidy received. This change is effective beginning in 2013. As a result of this legislation, MetLife will record a non-cash charge of approximately $75 million in the first quarter of 2010 (ending March 31, 2010). This charge represents the impact on deferred tax assets and will reduce both net income (GAAP) and operating earnings. The company emphasizes that operating earnings are a key metric for performance evaluation and resource allocation, though it is not a GAAP-defined measure.
Key Highlights
- 1MetLife is impacted by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.
- 2Legislation reduces the tax deductibility of retiree health care costs, beginning in 2013, by the amount of the Medicare Part D subsidy.
- 3A non-cash charge of approximately $75 million will be recorded in the quarter ending March 31, 2010.
- 4This charge is due to the reduction of deferred tax assets resulting from the change in tax deductibility.
- 5The charge will reduce both GAAP net income and MetLife's internally used 'operating earnings'.
- 6MetLife uses operating earnings to evaluate performance and allocate resources.
- 7The company clarifies that operating earnings is a non-GAAP measure and should not substitute for GAAP net income.