MetLife 2006 Annual Report Download - page 40

Company’s funding sources enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of
funds.
At both December 31, 2006 and 2005, the Company had outstanding $1.4 billion in short-term debt and at December 31, 2006 and
2005, had outstanding $10.0 billion and $9.5 billion in long-term debt, respectively.
Debt Issuances. On December 21, 2006, the Holding Company issued junior subordinated debentures with a face amount of
$1.25 billion. The debentures are scheduled for redemption on December 15, 2036; the final maturity of the debentures is December 15,
2066. The Holding Company may redeem the debentures (i) in whole or in part, at any time on or after December 15, 2031 at their principal
amount plus accrued and unpaid interest to the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to
December 15, 2031 at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price.
Interest is payable semi-annually at a fixed rate of 6.40% up to, but not including, the scheduled redemption date. In the event the
debentures are not redeemed on or before the scheduled redemption date, interest will accrue at an annual rate of three-month LIBOR plus
a margin equal to 2.205%, payable quarterly in arrears. The Holding Company has the right to, and in certain circumstances the
requirement to, defer interest payments on the debentures for a period up to ten years. Interest compounds during such periods of
deferral. In connection with the issuance of the debentures, the Holding Company entered into a replacement capital covenant (“RCC”). As
a part of the RCC, the Holding Company agreed that it will not repay, redeem, or purchase the debentures on or before December 15,
2056, unless, subject to certain limitations, it has received proceeds from the sale of specified capital securities. The RCC will terminate
upon the occurrence of certain events, including an acceleration of the debentures due to the occurrence of an event of default. The RCC
is not intended for the benefit of holders of the debentures and may not be enforced by them. The RCC is for the benefit of holders of one
or more other designated series of its indebtedness (which will initially be its 5.70% senior notes due June 15, 2035).
On June 28, 2006, Timberlake Financial L.L.C. (“Timberlake”), a subsidiary of RGA, completed an offering of $850 million of Series A
Floating Rate Insured Notes due June 2036, which is included in the Company’s long-term debt. Interest on the notes will accrue at an
annual rate of 1-month LIBOR plus a base margin, payable monthly. The notes represent senior, secured indebtedness of Timberlake with
no recourse to RGA or its other subsidiaries. Up to $150 million of additional notes may be offered in the future. The proceeds of the
offering provide long-term collateral to support Regulation XXX statutory reserves on 1.5 million term life insurance policies with guaranteed
level premium periods reinsured by RGA Reinsurance Company, a U.S. subsidiary of RGA.
MetLife Bank has entered into several funding agreements with the Federal Home Loan Bank of New York (the “FHLB of NY”) whereby
MetLife Bank has issued repurchase agreements in exchange for cash and for which the FHLB of NY has been granted a blanket lien on
MetLife Bank’s residential mortgages and mortgage-backed securities to collateralize MetLife Bank’s obligations under the repurchase
agreements. The repurchase agreements and the related security agreement represented by this blanket lien provide that upon any event
of default by MetLife Bank, the FHLB of NY’s recovery is limited to the amount of MetLife Bank’s liability under the outstanding repurchase
agreements. The amount of the Company’s liability for repurchase agreements with the FHLB of NY was $998 million and $855 million at
December 31, 2006 and 2005, respectively, which is included in long-term debt.
On December 8, 2005, RGA issued junior subordinated debentures with a face amount of $400 million. Interest is payable semi-
annually at a fixed rate of 6.75% up to but not including the scheduled redemption date. The securities may be redeemed (i) in whole or in
part, at any time on or after December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of redemption, or
(ii) in whole or in part, prior to December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of redemption or, if
greater, a make-whole price. In the event the junior subordinated debentures are not redeemed on or before the scheduled redemption
date of December 15, 2015, interest on these junior subordinated debentures will accrue at an annual rate of three-month LIBOR plus a
margin equal to 2.665%, payable quarterly in arrears. The final maturity of the debentures is December 15, 2065. RGA has the right to, and
in certain circumstances the requirement to, defer interest payments on the debentures for a period up to ten years. Interest compounds
during periods of deferral.
On June 29, 2005, the Holding Company issued 400 million pounds sterling ($729.2 million at issuance) aggregate principal amount of
5.25% senior notes due June 29, 2020 at a discount of 4.5 million pounds sterling ($8.1 million at issuance), for aggregate proceeds of
395.5 million pounds sterling ($721.1 million at issuance). The senior notes were initially offered and sold outside the United States in
reliance upon Regulation S under the Securities Act of 1933, as amended.
On June 23, 2005, the Holding Company issued in the United States public market $1,000 million aggregate principal amount of
5.00% senior notes due June 15, 2015 at a discount of $2.7 million ($997.3 million), and $1,000 million aggregate principal amount of
5.70% senior notes due June 15, 2035 at a discount of $2.4 million ($997.6 million).
MetLife Funding, Inc. (“MetLife Funding”), a subsidiary of Metropolitan Life, serves as a centralized finance unit for the Company.
Pursuant to a support agreement, Metropolitan Life has agreed to cause MetLife Funding to have a tangible net worth of at least one dollar.
At both December 31, 2006 and 2005, MetLife Funding had a tangible net worth of $11 million. MetLife Funding raises cash from various
funding sources and uses the proceeds to extend loans, through MetLife Credit Corp., another subsidiary of Metropolitan Life, to the
Holding Company, Metropolitan Life and other affiliates. MetLife Funding manages its funding sources to enhance the financial flexibility
and liquidity of Metropolitan Life and other affiliated companies. At December 31, 2006 and 2005, MetLife Funding had total outstanding
liabilities, including accrued interest payable, of $840 million and $456 million, respectively, consisting primarily of commercial paper.
Credit Facilities. The Company maintains committed and unsecured credit facilities aggregating $3.9 billion as of December 31, 2006.
When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements. The facilities can be used
37MetLife, Inc.