MetLife 2010 Annual Report Download - page 68

In February 2009, the Holding Company remarketed its existing $1.0 billion 4.91% Series B junior subordinated debt securities as
7.717% senior debt securities, Series B, due 2019. In August 2008, the Holding Company remarketed its existing $1.0 billion 4.82% Series A
junior subordinated debt securities as 6.817% senior debt securities, Series A, due 2018. Interest on both series of debt securities is payable
semi-annually. The Series A and Series B junior subordinated debt securities were originally issued in 2005 in connection with the common
equity units. See “— The Company — Liquidity and Capital Sources — Remarketing of Junior Subordinated Debt Securities and Settlement
of Stock Purchase Contracts.”
In April 2008, MetLife Capital Trust X, a VIE consolidated by the Company, issued exchangeable surplus trust securities (the “2008
Trust Securities”) with a face amount of $750 million. Interest on the 2008 Trust Securities or debt securities is payable semi-annually at a fixed
rate of 9.25% up to, but not including, April 8, 2038, the scheduled redemption date. In the event the 2008 Trust Securities or debt securities
are not redeemed on or before the scheduled redemption date, interest will accrue at an annual rate of 3-month LIBOR plus a margin equal to
5.540%, payable quarterly in arrears. See Note 13 of the Notes to the Consolidated Financial Statements for a description of the terms of
these debt securities.
Collateral Financing Arrangements. As described more fully in Note 12 of the Notes to the Consolidated Financial Statements:
• In December 2007, the Holding Company, in connection with the collateral financing arrangement associated with MetLife Reinsurance
Company of Charleston’s (“MRC”) reinsurance of the closed block liabilities, entered into an agreement with the unaffiliated financial
institution that referenced the $2.5 billion aggregate principal amount of 35-year surplus notes issued by MRC. Under the agreement,
the Holding Company is entitled to the interest paid by MRC on the surplus notes of 3-month LIBOR plus 0.55% in exchange for the
payment of 3-month LIBOR plus 1.12%, payable quarterly on such amount as adjusted, as described below.
Under this agreement, the Holding Company may also be required to pledge collateral or make payments to the unaffiliated financial
institution related to any decline in the estimated fair value of the surplus notes. Any such payments would be accounted for as a
receivable and included in other assets on the Company’s consolidated balance sheets and would not reduce the principal amount
outstanding of the surplus notes. Such payments would, however, reduce the amount of interest payments due from the Holding
Company under the agreement. Any payment received from the unaffiliated financial institution would reduce the receivable by an
amount equal to such payment and would also increase the amount of interest payments due from the Holding Company under the
agreement. In addition, the unaffiliated financial institution may be required to pledge collateral to the Holding Company related to any
increase in the estimated fair value of the surplus notes. During 2008, the Holding Company paid an aggregate of $800 million to the
unaffiliated financial institution relating to declines in the estimated fair value of the surplus notes. The Holding Company did not receive
any payments from the unaffiliated financial institution during 2008. During 2009, on a net basis, the Holding Company received
$375 million from the unaffiliated financial institution related to changes in the estimated fair value of the surplus notes. No payments
were made or received by the Holding Company during 2010. Since the closing of the collateral financing arrangement in December
2007, on a net basis, the Holding Company has paid $425 million to the unaffiliated financial institution related to changes in the
estimated fair value of the surplus notes. In addition, at December 31, 2010, the Holding Company had pledged collateral with an
estimated fair value of $49 million to the unaffiliated financial institution. At December 31, 2009, the Holding Company had no collateral
pledged to the unaffiliated financial institution in connection with this agreement. The Holding Company may also be required to make a
payment to the unaffiliated financial institution in connection with any early termination of this agreement.
• In May 2007, the Holding Company, in connection with the collateral financing arrangement associated with MetLife Reinsurance
Company of South Carolina’s (“MRSC”) reinsurance of universal life secondary guarantees, entered into an agreement with an
unaffiliated financial institution under which the Holding Company is entitled to the return on the investment portfolio held by trusts
established in connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the
unaffiliated financial institution of 3-month LIBOR plus 0.70%, payable quarterly. The collateral financing agreement may be extended by
agreement of the Holding Company and the unaffiliated financial institution on each anniversary of the closing. The Holding Company
may also be required to make payments to the unaffiliated financial institution, for deposit into the trusts, related to any decline in the
estimated fair value of the assets held by the trusts, as well as amounts outstanding upon maturity or early termination of the collateral
financing arrangement. During 2010, no payments were made or received by the Holding Company. During 2009 and 2008, the Holding
Company contributed $360 million and $320 million, respectively, as a result of declines in the estimated fair value of the assets in the
trusts. Cumulatively, since May 2007, the Holding Company has contributed a total of $680 million as a result of declines in the
estimated fair value of the assets in the trusts, all of which was deposited into the trusts.
In addition, the Holding Company may be required to pledge collateral to the unaffiliated financial institution under this agreement. At
December 31, 2010 and 2009, the Holding Company had pledged $63 million and $80 million under the agreement, respectively.
Remarketing of Junior Subordinated Debt Securities and Settlement of Stock Purchase Contracts. In February 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.
In August 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
65MetLife, Inc.