MetLife 2007 Annual Report Download - page 147

equity unit holder a junior subordinated debt security payable on August 15, 2010 at an annual rate of 4.82% and 4.91% on the Series A
and Series B trust preferred securities, respectively, in payment of any accrued and unpaid distributions.
Stock Purchase Contracts
Each stock purchase contract requires the holder of the common equity unit to purchase, and the Holding Company to sell, for $12.50,
on each of the initial stock purchase date and the subsequent stock purchase date, a number of newly issued or treasury shares of the
Holding Company’s common stock, par value $0.01 per share, equal to the applicable settlement rate. The settlement rate at the
respective stock purchase date will be calculated based on the closing price of the common stock during a specified 20-day period
immediately preceding the applicable stock purchase date. If the market value of the Holding Company’s common stock is less than the
threshold appreciation price of $53.10 but greater than $43.35, the reference price, the settlement rate will be a number of the Holding
Company’s common stock equal to the stated amount of $12.50 divided by the market value. If the market value is less than or equal to the
reference price, the settlement rate will be 0.28835 shares of the Holding Company’s common stock. If the market value is greater than or
equal to the threshold appreciation price, the settlement rate will be 0.23540 shares of the Holding Company’s common stock as adjusted
in accordance with the terms of the stock purchase contracts. Accordingly, upon settlement in the aggregate, the Holding Company will
receive proceeds of $2,070 million and issue between 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, 2007, 2006 and 2005, the Holding Company increased the other liability balance for the accretion of the discount on the
contractpaymentof$2million,$3millionand$2millionandmade contract payments of $31 million, $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 are being 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 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 years ended December 31, 2007 and 2006, the average
closing price for each of the 20 trading days before December 31 was greater than the threshold appreciation price. Accordingly, the stock
purchase contracts were included in diluted earnings per common share for the years ended December 31, 2007 and 2006. During the
period from the date of issuance through December 31, 2005, the average closing price for each of the 20 trading days before December
31 was less than the threshold appreciate price. Accordingly, the stock purchase contracts were excluded in diluted earnings per common
share for the year ended December 31, 2005. See Note 20.
14. Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of
Subsidiary 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. In October 2007, GenAmerica redeemed these securities which were due
to mature on June 30, 2027. As a result of this redemption, the Company recognized additional interest expense of $10 million. Capital
securities outstanding were $119 million, net of unamortized discounts of $6 million at December 31, 2006. Interest expense on these
instruments is included in other expenses and was $20 million, $11 million and $11 million for the years ended December 31, 2007, 2006
and 2005, respectively.
F-51MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)