MetLife 2004 Annual Report Download - page 77

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The change in maximum future earnings of the closed block is as follows:
Years Ended December 31,
2004 2003 2002
(Dollars in millions)
Balance at end of year ************************************************************************ $4,712 $4,907 $5,114
Less:
Reallocation of assets*********************************************************************** ——85
Balance at beginning of year ***************************************************************** 4,907 5,114 5,333
Change during year*************************************************************************** $ (195) $ (207) $ (304)
During the year ended December 31, 2002, the allocation of assets to the closed block was revised to appropriately classify assets in accordance
with the plan of demutualization. The reallocation of assets had no impact on consolidated assets or liabilities.
Metropolitan Life charges the closed block with federal income taxes, state and local premium taxes, and other additive state or local taxes, as well
as investment management expenses relating to the closed block as provided in the plan of demutualization. Metropolitan Life also charges the closed
block for expenses of maintaining the policies included in the closed block.
7. Debt
Debt consisted of the following:
December 31,
2004 2003
(Dollars in millions)
Senior notes, interest rates ranging from 3.91% to 7.25%, maturity dates ranging from 2005 to 2034 ****** $6,017 $4,256
Surplus notes, interest rates ranging from 7.00% to 7.88%, maturity dates ranging from 2005 to 2025 ***** 946 940
Fixed rate notes, interest rates ranging from 2.99% to 10.50%, maturity dates ranging from 2005 to 2006 ** 110 110
Capital lease obligations *********************************************************************** 66 74
Other notes with varying interest rates *********************************************************** 273 323
Total long-term debt ************************************************************************** 7,412 5,703
Total short-term debt ************************************************************************** 1,445 3,642
Total ******************************************************************************* $8,857 $9,345
The Company maintains committed and unsecured credit facilities aggregating $2.8 billion ($1.1 billion expiring in 2005, $175 million expiring in
2006 and $1.5 billion expiring in 2009). If these facilities were drawn upon, they would bear interest at varying rates in accordance with the respective
agreements. The facilities can be used for general corporate purposes and $2.5 billion of the facilities also serve as back-up lines of credit for the
Company’s commercial paper programs. At December 31, 2004, the Company had drawn approximately $56 million under the facilities expiring in 2005
at interest rates ranging from 5.44% to 6.38% and approximately another $50 million under the facility expiring in 2006 at an interest rate of 2.99%. In April
2003, the Company replaced an expiring $1 billion five-year credit facility with a $1 billion 364-day credit facility and the Holding Company was added as
a borrower. In May 2003, the Company replaced an expiring $140 million three-year credit facility with a $175 million three-year credit facility, which
expires in 2006. In April 2004, the Company replaced the $2.25 billion credit facilities expiring in 2004 and 2005, with a $1.0 billion 364-day credit facility
expiring in 2005 and a $1.5 billion five-year credit facility expiring in 2009. In July 2004, the Company renewed a $50 million 364-day credit facility.
At December 31, 2004, the Company had $961 million in outstanding letters of credit from various banks.
Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the
insurance department of the state of domicile.
The aggregate maturities of long-term debt for the Company are $1,468 million in 2005, $662 million in 2006, $36 million in 2007, $44 million in
2008, $58 million in 2009 and $5,144 million thereafter.
Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 2.3% and a weighted average maturity of
27 days at December 31, 2004. Short-term debt of the Company included commercial paper with a weighted average interest rate of 1.1% and a
weighted average maturity of 31 days at December 31, 2003. The Company has no other collateralized borrowings at December 31, 2004. The
Company had other collateralized borrowings with a weighted average coupon rate of 5.07% and a weighted average maturity of 30 days at
December 31, 2003.
Interest expense related to the Company’s indebtedness included in other expenses was $428 million, $420 million and $288 million for the years
ended December 31, 2004, 2003 and 2002, respectively.
8. Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts
MetLife Capital Trust I. In connection with MetLife, Inc.’s, initial public offering in April 2000, the Holding Company and MetLife Capital Trust I (the
‘‘Trust’’) issued equity security units (the ‘‘units’’). Each unit originally consisted of (i) a contract to purchase, for $50, shares of the Holding Company’s
common stock (the ‘‘purchase contracts’’) on May 15, 2003; and (ii) a capital security of the Trust, with a stated liquidation amount of $50.
In accordance with the terms of the units, the Trust was dissolved on February 5, 2003, and $1,006 million aggregate principal amount of
8.00% debentures of the Holding Company (the ‘‘MetLife debentures’’), the sole assets of the Trust, were distributed to the owners of the Trust’s capital
securities in exchange for their capital securities. The MetLife debentures were remarketed on behalf of the debenture owners on February 12, 2003 and
the interest rate on the MetLife debentures was reset as of February 15, 2003 to 3.911% per annum for a yield to maturity of 2.876%. As a result of the
remarketing, the debenture owners received $21 million ($0.03 per diluted common share) in excess of the carrying value of the capital securities. This
excess was recorded by the Company as a charge to additional paid-in capital and, for the purpose of calculating earnings per share, is subtracted from
net income to arrive at net income available to common shareholders.
On May 15, 2003, the purchase contracts associated with the units were settled. In exchange for $1,006 million, the Company issued 2.97 shares
of MetLife, Inc. common stock per purchase contract, or 59.8 million shares of treasury stock. The excess of the Company’s cost of the treasury stock
MetLife, Inc.
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