The following table sets forth selected financial information for the Trust. The financial information for the years ended December 31, 2009, 2008 and 2007 and at December 31, 2009 and 2008, has been derived from the Trust’s audited financial statements included elsewhere herein. The financial information for the years ended December 31, 2006 and 2005 and at December 31, 2007, 2006 and 2005 has been derived from the Trust’s audited financial statements not included herein. The following statements of changes in net assets and balance sheet data have been prepared in conformity with accounting principles generally accepted in the United States of America. The following information should be read in conjunction with and is qualified entirely by the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements appearing elsewhere herein.
For purposes of this discussion, “Trust” refers to the MetLife Policyholder Trust. Following this summary is a discussion addressing the results of operations and financial condition of the Trust for the periods indicated. This discussion should be read in conjunction with “Note Regarding Forward-Looking Statements,” “Risk Factors,” “Selected Financial Data” and the Trust’s financial statements included elsewhere herein.
The Trust was established under the Metropolitan Life Insurance Company (“Metropolitan Life”) plan of reorganization (the “Plan”) and pursuant to the MetLife Policyholder Trust Agreement, dated as of November 3, 1999, by and among Metropolitan Life, MetLife, Inc. (the “Holding Company”), Wilmington Trust Company (not in its individual capacity, but solely as trustee for the Trust, the “Trustee”) and ChaseMellon Shareholder Services, L.L.C., as custodian (now known as Mellon Investor Services LLC, the “Custodian”), as amended on November 8, 2001 (the “Trust Agreement”), in connection with the conversion of Metropolitan Life from a mutual life insurance company to a stock life insurance company. The Trust is a single-purpose trust that does not engage in any business or activity other than voting and holding the shares of common stock of MetLife, Inc. issued to the Trust for the benefit of certain eligible policyholders of Metropolitan Life under the Plan and the Trust Agreement (the “Trust Shares”) and certain closely related activities, such as distributing cash dividends.
The number of Trust Interests outstanding at December 31, 2009 and 2008 was 233,157,716 and 242,724,190, respectively. The decrease of 9,566,474 in the number of Trust Interests is primarily attributable to net Trust Interests redeemed and Trust Interests withdrawn. Net assets of the Trust consist solely of Trust Shares and will increase or decrease depending upon, among other things, the movement of Trust Shares into or out of the Trust as directed by the Beneficiaries.
Net assets in the Trust decreased $219 million, or 3%, to $8,242 million for the year ended December 31, 2009 from $8,461 million for the comparable 2008 period. This decrease is primarily due to the impact of withdrawals by Beneficiaries from the Trust, together with (i) a change in net unrealized investment gains on the Trust Shares, and (ii) activity under the MetLife, Inc. Purchase and Sale Program (the “Purchase and Sale Program”). Net unrealized investment gains, which represent the difference between the fair value and the cost basis of the Trust Shares, decreased $84 million from the prior year. A net reduction of 9,566,474 Trust Interests resulted from a decrease of 4,484,513 Trust Interests due to withdrawals by Beneficiaries from the Trust, and a net decrease of 5,081,961
Financial Statements at December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007:
We have audited the accompanying statements of assets and liabilities of the MetLife Policyholder Trust (the “Trust”) as of December 31, 2009 and 2008, and the related statements of operations and changes in net assets for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
Under the Plan and the Trust Agreement, each policyholder’s membership interest was extinguished and certain eligible policyholders of Metropolitan Life (the “Trust Eligible Policyholders”) received, in exchange for that interest, a number of interests in the Trust (“Trust Interests”) equal to the number of shares of common stock of the Holding Company, par value $0.01 per share (the “Common Stock”), allocated to them in accordance with the Plan. The assets of the Trust consist principally of the shares of Common Stock issued to the Trust (the “Trust Shares”) for the benefit of the Trust Eligible Policyholders and permitted transferees (collectively, the “Beneficiaries”). The Trust Shares are held in the name of the Trustee, on behalf of the Trust, which has legal title over the Trust Shares. The Beneficiaries do not have legal title to any part of the assets of the Trust. The Trust Interests represent undivided fractional interests in the Trust Shares and other assets of the Trust beneficially owned by a Trust Beneficiary through the Custodian. On April 7, 2000, the date of demutualization of Metropolitan Life, the Holding Company distributed to the Trust 494,466,664 shares of Common Stock for the benefit of policyholders of Metropolitan Life. Withdrawals by Beneficiaries of Trust Shares, transactions by Beneficiaries under the Purchase and Sale Program (as defined below), and escheatment of unclaimed Trust Shares resulted in a decrease in the number of Trust Shares from 242,724,190 at December 31, 2008 to 233,157,716 at December 31, 2009.
A Trust Interest entitles the Beneficiary to certain rights, including the right to: (i) receive dividends distributed upon Trust Shares; (ii) have Trust Shares withdrawn from the Trust to be sold for cash through a purchase and sale program established by the Holding Company pursuant to the Plan (the “Purchase and Sale Program”); (iii) deposit in the Trust additional shares of Common Stock purchased through the Purchase and Sale Program; (iv) withdraw Trust Shares; and (v) instruct the Trustee to vote the Trust Shares on certain matters, each as further described in and limited by the terms of the Trust Agreement. The Trustee has no beneficial interest in the Trust Shares.
In accordance with the Trust Agreement, the Holding Company distributes cash dividends directly to the Beneficiaries at the same time as the payment of dividends to the Holding Company’s stockholders. In the event that dividends are undeliverable to the Beneficiaries, the Holding Company retains such dividends until they are claimed by such Beneficiaries or escheated in accordance with applicable state law. Beginning in 2008, cash dividends that have been declared but are undeliverable to the Beneficiaries and the cash amounts of dividend checks that have not been cashed by the Beneficiaries have been recorded as a receivable from the Holding Company and a liability of the Trust to such Beneficiaries.