MetLife 2005 Annual Report Download - page 112

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Argentina
As a part of the Travelers acquisition, the Company acquired Citigroup’s insurance operations in Argentina. The Argentinean economic, regulatory
and legal environment, including interpretations of laws and regulations by regulators and courts, is uncertain. Potential legal or governmental actions
related to pension reform, fiduciary responsibilities, performance guarantees and tax rulings could adversely affect the results of the Company. Upon
acquisition, the Company established liabilities related to insurance liabilities, most significantly death and disability policy liabilities, based upon its
interpretation of Argentinean law and the Company’s best estimate of its obligations under such law. Additionally, the Company has established certain
liabilities related to its estimated obligations associated with litigation and tax rulings related to pesification.
Commitments
Leases
In accordance with industry practice, certain of the Company’s income from lease agreements with retail tenants is contingent upon the level of the
tenants’ sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data
processing and other equipment. Future minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements
were as follows:
Gross
Rental Sublease Rental
Income Income Payments
(In millions)
2006 *************************************************************************************** $440 $20 $218
2007 *************************************************************************************** $398 $17 $196
2008 *************************************************************************************** $329 $14 $165
2009 *************************************************************************************** $270 $ 7 $131
2010 *************************************************************************************** $218 $ 6 $104
Thereafter *********************************************************************************** $737 $17 $524
Commitments to Fund Partnership Investments
The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commit-
ments were $2,684 million and $1,324 million at December 31, 2005 and 2004, respectively. The Company anticipates that these amounts will be
invested in partnerships over the next five years.
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $2,974 million
and $1,189 million at December 31, 2005 and 2004, respectively.
Other Commitments
TIC is a member of the Federal Home Loan Bank of Boston (the ‘‘FHLB of Boston’’) and holds $70 million of common stock of the FHLB of Boston,
which is included in equity securities on the Company’s balance sheets. TIC has also entered into several funding agreements with the FHLB of Boston
whereby TIC has issued such funding agreements in exchange for cash and for which the FHLB of Boston has been granted a blanket lien on TIC’s
residential mortgages and mortgage-backed securities to collateralize TIC’s obligations under the funding agreements. TIC maintains control over these
pledged assets, and may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining
qualified collateral is sufficient to satisfy the collateral maintenance level. The funding agreements and the related security agreement represented by this
blanket lien, provide that upon any event of default by TIC, the FHLB of Boston’s recovery is limited to the amount of TIC’s liability under the outstanding
funding agreements. The amount of the Company’s liability for funding agreements with the Bank as of December 31, 2005 is $1.1 billion, which is
included in policyholder account balances.
On December 12, 2005, RGA repurchased 1.6 million shares of its outstanding common stock at an aggregate price of approximately $76 million
under an accelerated share repurchase agreement with a major bank. The bank borrowed the stock sold to RGA from third parties and is purchasing the
shares in the open market over the subsequent few months to return to the lenders. RGA will either pay or receive an amount based on the actual
amount paid by the bank to purchase the shares. These repurchases resulted in an increase in the Company’s ownership percentage of RGA to
approximately to 53% at December 31, 2005 from approximately 52% at December 31, 2004. In February 2006, the final purchase price was
determined resulting in a cash settlement substantially equal to the aggregate cost. RGA recorded the initial repurchase of shares as treasury stock and
recorded the amount received as an adjustment to the cost of the treasury stock.
Guarantees
In the course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may
be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has
provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that
are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course
of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other
liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and
those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and
guarantees is subject to a contractual limitation ranging from less than $1 million to $2 billion, with a cumulative maximum of $5.2 billion, while in other
cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that
it is possible to determine the maximum potential amount due under these guarantees in the future.
In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies other of its
agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation
MetLife, Inc.
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