MetLife 2006 Annual Report Download - page 52

Commitments to Fund Bank Credit Facilities and Bridge Loans
The Company commits to lend funds under bank credit facilities and bridge loans. The amounts of these unfunded commitments were
$1.9 billion and $346 million at December 31, 2006 and 2005, respectively. The purpose of these commitments and any related fundings is
to enhance the Company’s total return on its investment portfolio. There are no other obligations or liabilities arising from such
arrangements that are reasonably likely to become material.
Lease Commitments
The Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other
equipment. The Company’s commitments under such lease agreements are included within the contractual obligations table. See
“— Liquidity and Capital Resources — The Company — Liquidity Uses — Investment and Other.”
Credit Facilities and Letters of Credit
The Company maintains committed and unsecured credit facilities and letters of credit with various financial institutions. See
“— Liquidity and Capital Resources — The Company — Liquidity Sources — Credit Facilities” and “— Letters of Credit” for further
descriptions of such arrangements.
Share-Based Arrangements
In connection with the issuance of the common equity units, the Holding Company has issued forward stock purchase contracts under
which the Holding Company will issue, in 2008 and 2009, between 39.0 and 47.8 million shares, depending upon whether the share price
is greater than $43.45 and less than $53.10. See “— Liquidity and Capital Resources — The Holding Company — Liquidity Sources —
Common Equity Units.”
Guarantees
In the normal 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 counter-
parties 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 $3.6 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 that could become 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
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 with respect to duration or amount, the Company does not believe that it is possible to determine the maximum
potential amount that could become due under these indemnities in the future.
The Company has also guaranteed minimum investment returns on certain international retirement funds in accordance with local laws.
Since these guarantees are not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to
determine the maximum potential amount that could become due under these guarantees in the future.
During the year ended December 31, 2006, the Company did not record any additional liabilities for indemnities, guarantees and
commitments. In the fourth quarter of 2006, the Company eliminated $4 million of a liability that was previously recorded with respect to
indemnities provided in connection with a certain disposition. The Company’s recorded liabilities at December 31, 2006 and 2005 for
indemnities, guarantees and commitments were $5 million and $9 million, respectively.
In connection with synthetically created investment transactions, the Company writes credit default swap obligations requiring payment
of principal due in exchange for the referenced credit obligation, depending on the nature or occurrence of specified credit events for the
referenced entities. In the event of a specified credit event, the Company’s maximum amount at risk, assuming the value of the referenced
credits becomes worthless, was $396 million at December 31, 2006. The credit default swaps expire at various times during the next ten
years.
Other Commitments
MetLife Insurance Company of Connecticut (“MICC”) 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 consolidated balance
sheets. MICC has also entered into several funding agreements with the FHLB of Boston whereby MICC has issued such funding
agreements in exchange for cash and for which the FHLB of Boston has been granted a blanket lien on MICC’s residential mortgages and
mortgage-backed securities to collateralize MICC’s obligations under the funding agreements. MICC 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 MICC, the FHLB of Boston’s recovery is limited to the
amount of MICC’s liability under the outstanding funding agreements. The amount of the Company’s liability for funding agreements with
the FHLB of Boston was $926 million and $1.1 billion at December 31, 2006 and 2005, respectively, which is included in PABs.
MetLife Bank is a member of the FHLB of NY and holds $54 million and $43 million of common stock of the FHLB of NY, at December 31,
2006 and 2005, respectively, which is included in equity securities on the Company’s consolidated balance sheet. MetLife Bank has also
entered into repurchase agreements with 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. MetLife Bank 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 repurchase agreements and the related security agreement
49MetLife, Inc.