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METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
civil action alleging violations of the U.S. securities laws against General American. Under the SEC procedures, General American can avail itself of the
opportunity to respond to the SEC staff before it makes a formal recommendation regarding whether any action alleging violations of the U.S. securities
laws should be considered. General American has responded to the Wells Notice. The Company is fully cooperating with regard to these information
requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a
material adverse effect on the Company’s consolidated financial position.
As anticipated, the SEC issued a formal order of investigation related to certain sales by a former MetLife sales representative to the Sheriff’s
Department of Fulton County, Georgia. The Company is fully cooperating with respect to inquiries from the SEC.
The Company has received a number of subpoenas and other requests from the Office of the Attorney General of the State of New York seeking,
among other things, information regarding and relating to compensation agreements between insurance brokers and the Company, whether MetLife has
provided or is aware of the provision of ‘‘fictitious’’ or ‘‘inflated’’ quotes, and information regarding tying arrangements with respect to reinsurance. Based
upon an internal review, the Company advised the Attorney General for the State of New York that MetLife was not aware of any instance in which MetLife
had provided a ‘‘fictitious’’ or ‘‘inflated’’ quote. MetLife also has received subpoenas, including sets of interrogatories, from the Office of the Attorney
General of the State of Connecticut seeking information and documents including contingent commission payments to brokers and MetLife’s awareness
of any ‘‘sham’’ bids for business. MetLife also has received a Civil Investigative Demand from the Office of the Attorney General for the State of
Massachusetts seeking information and documents concerning bids and quotes that the Company submitted to potential customers in Massachusetts,
the identity of agents, brokers, and producers to whom the Company submitted such bids or quotes, and communications with a certain broker. The
Company has received two subpoenas from the District Attorney of the County of San Diego, California. The subpoenas seek numerous documents
including incentive agreements entered into with brokers. The Florida Department of Financial Services and the Florida Office of Insurance Regulation also
have served subpoenas on the Company asking for answers to interrogatories and document requests concerning topics that include compensation
paid to intermediaries. The Office of the Attorney General for the State of Florida has also served a subpoena on the Company seeking, among other
things, copies of materials produced in response to the subpoenas discussed above. The Company has received a subpoena from the Office of the
U.S. Attorney for the Southern District of California asking for documents regarding the insurance broker, Universal Life Resources. The Insurance
Commissioner of Oklahoma has served a subpoena, including a set of interrogatories, on the Company seeking, among other things, documents and
information concerning the compensation of insurance producers for insurance covering Oklahoma entities and persons. The Ohio Department of
Insurance has requested documents regarding a broker and certain Ohio public entity groups. The Company continues to cooperate fully with these
inquiries and is responding to the subpoenas and other requests. MetLife is continuing to conduct an internal review of its commission payment
practices.
Approximately sixteen broker-related lawsuits in which the Company was named as a defendant were filed. Voluntary dismissals and consolidations
have reduced the number of pending actions to four. In one of these, the California Insurance Commissioner is suing in California state court Metropolitan
Life, Paragon Life Insurance Company and other companies alleging that the defendants violated certain provisions of the California Insurance Code.
Another of these actions is pending in a multi-district proceeding established in the federal district court in the District of New Jersey. In this proceeding,
plaintiffs have filed an amended class action complaint consolidating the claims from separate actions that had been filed in or transferred to the District of
New Jersey. The consolidated amended complaint alleges that the Holding Company, Metropolitan Life, several other insurance companies and several
insurance brokers violated RICO, ERISA, and antitrust laws and committed other misconduct in the context of providing insurance to employee benefit
plans and to persons who participate in such employee benefit plans. Plaintiffs seek to represent classes of employers that established employee benefit
plans and persons who participated in such employee benefit plans. A motion for class certification has been filed. Plaintiffs in several other actions have
voluntarily dismissed their claims. The Company intends to vigorously defend these cases.
In addition to those discussed above, regulators and others have made a number of inquiries of the insurance industry regarding industry brokerage
practices and related matters and other inquiries may begin. It is reasonably possible that MetLife will receive additional subpoenas, interrogatories,
requests and lawsuits. MetLife will fully cooperate with all regulatory inquiries and intends to vigorously defend all lawsuits.
The Company has received a subpoena from the Connecticut Attorney General requesting information regarding its participation in any finite
reinsurance transactions. MetLife has also received information requests relating to finite insurance or reinsurance from other regulatory and governmental
authorities. MetLife believes it has appropriately accounted for its transactions of this type and intends to cooperate fully with these information requests.
The Company believes that a number of other industry participants have received similar requests from various regulatory and governmental authorities. It
is reasonably possible that MetLife or its subsidiaries may receive additional requests. MetLife and any such subsidiaries will fully cooperate with all such
requests.
As previously disclosed, the NASD staff notified MSI, NES and Walnut Street, all direct or indirect subsidiaries of MetLife, Inc., that it has made a
preliminary determination to file charges of violations of the NASD’s and the SEC’s rules against the firms. The pending investigation was initiated after the
firms reported to the NASD that a limited number of mutual fund transactions processed by firm representatives and at the firms’ consolidated trading
desk, during the period April through December 2003, had been received from customers after 4:00 p.m., Eastern time, and received the same day’s
net asset value. The potential charges of violations of the NASD’s and the SEC’s rules relate to the processing of transactions received after 4:00 p.m.,
the firms’ maintenance of books and records, supervisory procedures and responses to the NASD’s information requests. Under the NASD’s
procedures, the firms have submitted a response to the NASD staff. The NASD staff has not made a formal recommendation regarding whether any
action alleging violations of the rules should be filed. MetLife continues to cooperate fully with the NASD.
Following an inquiry commencing in March 2004, the staff of the NASD has notified MSI that it has made a preliminary determination to recommend
charging MSI with the failure to adopt, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with suitability
requirements regarding the sale of college savings plans, also known as 529 plans. This notification follows an industry-wide inquiry by the NASD
examining sales of 529 plans. Under the NASD’s procedures, MSI submitted its written explanation of why it believes charges should not be filed. The
NASD staff has not made a formal recommendation regarding whether any action alleging violations of applicable rules should be filed. MSI continues to
cooperate fully with the NASD.
In February 2006, the Company learned that the SEC has commenced a formal investigation of NES in connection with the suitability of its sales of
various universal life insurance policies. The Company believes that others in the insurance industry are the subject of similar investigations by the SEC.
NES is cooperating fully with the SEC.
MetLife, Inc.
F-48