MetLife 2006 Annual Report Download - page 132

39.0 million and 47.8 million shares of its common stock. The stock purchase contract may be exercised at the option of the holder at any
time prior to the settlement date. However, upon early settlement, the holder will receive the minimum settlement rate.
The stock purchase contracts further require the Holding Company to pay the holder of the common equity unit quarterly contract
payments on the stock purchase contracts at the annual rate of 1.510% on the stated amount of $25 per stock purchase contract until the
initial stock purchase date and at the annual rate of 1.465% on the remaining stated amount of $12.50 per stock purchase contract
thereafter.
The quarterly distributions on the Series A and Series B trust preferred securities of 4.82% and 4.91%, respectively, combined with the
contract payments on the stock purchase contract of 1.510%, (1.465% after the initial stock purchase date) result in the 6.375% yield on
thecommonequityunits.
If the Holding Company defers any of the contract payments on the stock purchase contract, then it will accrue additional amounts on
the deferred amounts at the annual rate of 6.375% until paid, to the extent permitted by law.
The value of the stock purchase contracts at issuance, $96.6 million, were calculated as the present value of the future contract
payments due under the stock purchase contract of 1.510% through the initial stock purchase date, and 1.465% up to the subsequent
stock purchase date, discounted at the interest rate on the supporting junior subordinated debt securities issued by the Holding Company,
4.82% or 4.91% on the Series A and Series B trust preferred securities, respectively. The value of the stock purchase contracts was
recorded in other liabilities with an offsetting decrease in additional paid-in capital. The other liability balance related to the stock purchase
contracts will accrue interest at the discount rate of 4.82% or 4.91%, as applicable, with an offsetting increase to interest expense. When
the contract payments are made under the stock purchase contracts they will reduce the other liability balance. During the years ended
December 31, 2006 and 2005, the Holding Company increased the other liability balance for the accretion of the discount on the contract
payment of $3 million and $2 million and made contract payments of $31 million and $13 million, respectively.
Issuance Costs
In connection with the offering of common equity units, the Holding Company incurred $55.3 million of issuance costs of which
$5.8 million relate to the issuance of the junior subordinated debt securities underlying common equity units which fund the Series A and
Series B trust preferred securities and $49.5 million relate to the expected issuance of the common stock under the stock purchase
contracts. The $5.8 million in debt issuance costs have been capitalized, are included in other assets, and will be amortized using the
effective interest method over the period from issuance date of the common equity units to the initial and subsequent stock purchase date.
The remaining $49.5 million of costs relate to the common stock issuance under the stock purchase contracts and have been recorded as
a reduction of additional paid-in capital.
Earnings Per Common Share
The stock purchase contracts are reflected in diluted earnings per common share using the treasury stock method, and are dilutive
when the average closing price of the Holding Company’s common stock for each of the 20 trading days before the close of the accounting
period is greater than or equal to the threshold appreciation price of $53.10. During the year ended December 31, 2006, the average
closing price for each of the 20 trading days before December 31, 2006, was greater than the threshold appreciation price. Accordingly,
the stock purchase contracts were included in diluted earnings per common share. See Note 19.
13. Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsid-
iary Trusts
GenAmerica Capital I. In June 1997, GenAmerica Corporation (“GenAmerica”) issued $125 million of 8.525% capital securities
through a wholly-owned subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally guaranteed, on a subordinated
basis, the obligation of the trust under the capital securities and is obligated to mandatorily redeem the securities on June 30, 2027.
GenAmerica may prepay the securities any time after June 30, 2007. Capital securities outstanding were $119 million, net of unamortized
discounts of $6 million at both December 31, 2006 and 2005. Interest expense on these instruments is included in other expenses and
was $11 million for each of the years ended December 31, 2006, 2005 and 2004.
RGA Capital Trust I. In December 2001, RGA, through its wholly-owned trust, RGA Capital Trust I (the “Trust”), issued 4,500,000
Preferred Income Equity Redeemable Securities (“PIERS”) Units. Each PIERS unit consists of: (i) a preferred security issued by the Trust,
having a stated liquidation amount of $50 per unit, representing an undivided beneficial ownership interest in the assets of the Trust, which
consist solely of junior subordinated debentures issued by RGA which have a principal amount at maturity of $50 and a stated maturity of
March 18, 2051; and (ii) a warrant to purchase, at any time prior to December 15, 2050, 1.2508 shares of RGA stock at an exercise price
of $50.
The fair market value of the warrant on the issuance date was $14.87 and is detachable from the preferred security. RGA fully and
unconditionally guarantees, on a subordinated basis, the obligations of the Trust under the preferred securities. The preferred securities
and subordinated debentures were issued at a discount (original issue discount) to the face or liquidation value of $14.87 per security. The
securities will accrete to their $50 face/liquidation value over the life of the security on a level yield basis. The weighted average effective
interest rate on the preferred securities and the subordinated debentures is 8.25% per annum. Capital securities outstanding were
$159 million, net of unamortized discounts of $66 million at both December 31, 2006 and 2005.
F-49MetLife, Inc.
METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)