MetLife 2009 Annual Report Download - page 64

Remarketing of Junior Subordinated Debt Securities and Settlement of Stock Purchase Contracts. On February 17, 2009, the Holding
Company closed the successful remarketing of the Series B portion of the junior subordinated debt securities underlying the common equity
units. The Series B junior subordinated debt securities were modified as permitted by their terms to be 7.717% senior debt securities,
Series B, due February 15, 2019. The Holding Company did not receive any proceeds from the remarketing. Most common equity unit holders
chose to have their junior subordinated debt securities remarketed and used the remarketing proceeds to settle their payment obligations
under the applicable stock purchase contract. For those common equity unit holders that elected not to participate in the remarketing and
elected to use their own cash to satisfy the payment obligations under the stock purchase contract, the terms of the debt are the same as the
remarketed debt. The subsequent settlement of the stock purchase contracts occurred on February 17, 2009, providing proceeds to the
Holding Company of $1,035 million in exchange for shares of the Holding Company’s common stock. The Holding Company delivered
24,343,154 shares of its newly issued common stock to settle the stock purchase contracts.
On August 15, 2008, the Holding Company closed the successful remarketing of the Series A portion of the junior subordinated debt
securities underlying the common equity units. The Series A junior subordinated debt securities were modified as permitted by their terms to
be 6.817% senior debt securities, Series A, due August 15, 2018. The Holding Company did not receive any proceeds from the remarketing.
Most common equity unit holders chose to have their junior subordinated debt securities remarketed and used the remarketing proceeds to
settle their payment obligations under the applicable stock purchase contract. For those common equity unit holders that elected not to
participate in the remarketing and elected to use their own cash to satisfy the payment obligations under the stock purchase contract, the
terms of the debt are the same as the remarketed debt. The initial settlement of the stock purchase contracts occurred on August 15, 2008,
providing proceeds to the Holding Company of $1,035 million in exchange for shares of the Holding Company’s common stock. The Holding
Company delivered 20,244,549 shares of its common stock held in treasury at a value of $1,064 million to settle the stock purchase
contracts.
Other. On March 2, 2009, the Company sold Cova, the parent company of Texas Life, for $130 million in cash consideration, excluding
$1 million of transaction costs. The proceeds of the transaction were paid to the Holding Company.
Credit and Committed Facilities. The Company maintains unsecured credit facilities and committed facilities, which aggregated
$3.2 billion and $12.8 billion, respectively, at December 31, 2009. When drawn upon, these facilities bear interest at varying rates in
accordance with the respective agreements.
The unsecured credit facilities are used for general corporate purposes. At December 31, 2009, the Company had outstanding
$548 million in letters of credit and no drawdowns against these facilities. Remaining unused commitments were $2.6 billion at December 31,
2009.
The committed facilities are used for collateral for certain of the Company’s affiliated reinsurance liabilities. At December 31, 2009, the
Company had outstanding $4.7 billion in letters of credit and $2.8 billion in aggregate drawdowns against these facilities. Remaining unused
commitments were $5.4 billion at December 31, 2009.
See Note 11 of the Notes to the Consolidated Financial Statements for further discussion of these facilities.
We have no reason to believe that our lending counterparties are unable to fulfill their respective contractual obligations under these
facilities. As commitments associated with letters of credit and financing arrangements may expire unused, these amounts do not necessarily
reflect the Company’s actual future cash funding requirements.
Covenants. Certain of the Company’s debt instruments, credit facilities and committed facilities contain various administrative,
reporting, legal and financial covenants. The Company believes it was in compliance with all covenants at December 31, 2009 and 2008.
Common Stock. During the years ended December 31, 2009, 2008 and 2007, 861,586 shares, 97,515,737 shares and
3,864,894 shares of common stock were issued from treasury stock for $46 million, $5,221 million and $172 million, respectively. During
the year ended December 31, 2008, 11,250,000 shares were newly issued. There were no newly issued shares during 2007 and 2009.
On October 8, 2008, the Holding Company issued 86,250,000 shares of its common stock at a price of $26.50 per share for gross
proceeds of $2.3 billion. Of these shares issued, 75,000,000 shares were issued from treasury stock, and 11,250,000 were newly issued
shares.
Preferred Stock. During the year ended December 31, 2009, the Holding Company did not issue any preferred stock. In December
2008, the Holding Company entered into a replacement capital covenant (the “Replacement Capital Covenant”) whereby the Company
agreed for the benefit of holders of one or more series of the Company’s unsecured long-term indebtedness designated from time to time by
the Company in accordance with the terms of the Replacement Capital Covenant (“Covered Debt”), that the Company will not repay, redeem
or purchase and will cause its subsidiaries not to repay, redeem or purchase, on or before the termination of the Replacement Capital
Covenant on December 31, 2018 (or earlier termination by agreement of the holders of Covered Debt or when there is no longer any
outstanding series of unsecured long-term indebtedness which qualifies for designation as “Covered Debt”), the Floating Rate Non-
Cumulative Preferred Stock, Series A, of the Company or the 6.500% Non-Cumulative Preferred Stock, Series B, of the Company, unless
such repayment, redemption or purchase is made from the proceeds of the issuance of certain replacement capital securities and pursuant to
the other terms and conditions set forth in the Replacement Capital Covenant.
Liquidity and Capital Uses
Debt Repayments. During the years ended December 31, 2009, 2008 and 2007, MetLife Bank made repayments of $497 million,
$371 million and $175 million, respectively, to the FHLB of NY related to long-term borrowings. During the years ended December 31, 2009
and 2008, MetLife Bank made repayments related to short-term borrowings of $26.4 billion and $4.6 billion, respectively, to the FHLB of NY
and $21.2 billion and $650 million, respectively, to the Federal Reserve Bank of New York. During the year ended December 31, 2009, MICC
made repayments of $300 million to the FHLB of Boston related to short-term borrowings.
Insurance Liabilities. The Company’s principal cash outflows primarily relate to the liabilities associated with its various life insurance,
property and casualty, annuity and group pension products, operating expenses and income tax, as well as principal and interest on its
outstanding debt obligations. Liabilities arising from its insurance activities primarily relate to benefit payments under the aforementioned
products, as well as payments for policy surrenders, withdrawals and loans. For annuity or deposit type products, surrender or lapse product
behavior differs somewhat by segment. In the Retirement Products segment, which includes individual annuities, lapses and surrenders tend
to occur in the normal course of business. In the year ended December 31, 2009, both fixed and variable annuities in the Retirement Products
segment experienced positive net flows and a decline in lapse rates. In the Corporate Benefit Funding (“CBF”) segment, which includes
58 MetLife, Inc.