Net assets in the Trust increased $3.6 billion, or 54%, to $10.3 billion at December 31, 2013 from $6.7 billion at December 31, 2012. This increase is primarily due to an increase in net unrealized investment gains on the Trust Shares, partially offset by (i) net activity under the MetLife, Inc. Purchase and Sale Program (the “Purchase and Sale Program”); (ii) the impact of withdrawals by Beneficiaries from the Trust; and (iii) the impact of escheatment of Trust Shares. Net unrealized investment gains, which represent the difference between the estimated fair value and the cost basis of the Trust Shares, increased $3.8 billion from the prior year. A net reduction of 11,399,908 Trust Interests resulted from a net decrease of 9,008,998 Trust Interests in connection with redemptions and issuances under the Purchase and Sale Program, a decrease of 1,386,290 Trust Interests due to withdrawals by Beneficiaries from the Trust, and a decrease of 1,004,620 Trust Interests due to escheatment of Trust Shares. Net redemptions by Beneficiaries through the Purchase and Sale Program, withdrawals by Beneficiaries from the Trust and escheatment of unclaimed cash and Trust Shares, resulted in decreases in net assets for the year ended December 31, 2013 of $126 million, $20 million and $14 million, respectively. Net investment income of $198 million, which consisted of Common Stock dividends received from MetLife, Inc., and net realized investment gains of $268 million recognized on the sale of Trust Shares sold in the Purchase and Sale Program, were fully allocated to Beneficiaries.
Financial Statements at December 31, 2013 and 2012 and for the Years Ended December 31, 2013, 2012 and 2011:
In our opinion, such financial statements present fairly, in all material respects, the financial position of the MetLife Policyholder Trust as of December 31, 2013 and 2012, and the results of its operations and changes in its net assets for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
On November 1, 2010 (the “Acquisition Date”), MetLife, Inc. completed the acquisition of American Life Insurance Company from AM Holdings LLC (formerly known as ALICO Holdings LLC) (“AM Holdings”), a subsidiary of American International Group, Inc. (“AIG”), and Delaware American Life Insurance Company from AIG (the “Acquisition”). In connection with the financing of the Acquisition, in August 2010, MetLife, Inc. issued 86.3 million new shares of its Common Stock and, on the Acquisition Date, MetLife, Inc. issued to AM Holdings 78.2 million new shares of its Common Stock and 6.9 million shares of its Series B contingent convertible junior participating non-cumulative perpetual preferred stock (the “Convertible Preferred Stock”) convertible into approximately 68.6 million shares of Common Stock (subject to anti-dilution adjustments) upon a favorable vote of MetLife, Inc.’s common stockholders. In March 2011, AM Holdings sold the 78.2 million shares of Common Stock in a public offering concurrent with a public offering by MetLife, Inc. of 68.6 million new shares of its Common Stock, the proceeds of which were used to repurchase and cancel all of the Convertible Preferred Stock.
The number of Trust Shares declined to 190,935,381 at December 31, 2013 as a result of withdrawals by Beneficiaries of Trust Shares, transactions by Beneficiaries under the Purchase and Sale Program and escheatment of unclaimed Trust Shares. The percentage of outstanding shares of Common Stock owned by the Trust at December 31, 2013 decreased to 17.0% as a result of these withdrawals, transactions and escheatments, as well as due to Common Stock issuances by MetLife, Inc., including those described above.
The Trust Agreement provides that regular cash dividends, if any, collected or received by the Trustee with respect to the Trust Shares shall be distributed by the Custodian semi-annually to the Beneficiaries within 90 days after receipt by the Trustee. Distributions of all other cash dividends shall be made by the Custodian to the Beneficiaries on the first business day following the 30th day after the Trust receives the dividends. Alternatively, the Trust Agreement provides that the Trustee may arrange with MetLife, Inc. for the direct payment by MetLife, Inc. of such cash dividends to the Beneficiaries. Historically, MetLife, Inc. has used the latter method. See “-Receivable from MetLife, Inc. and Dividends Payable to Trust Beneficiaries.” All security transactions are recorded on a trade date basis. See Note 5.
Beneficiaries may instruct the program agent for the Purchase and Sale Program to withdraw their allocated shares from the Trust for sale through the Purchase and Sale Program. Trust Interests of 9,078,999, 6,294,540 and 6,299,413 were redeemed for this purpose, which generated net realized investment gains of $268,040 thousand, $127,560 thousand and $168,290 thousand for the years ended December 31, 2013, 2012 and 2011, respectively. Beneficiaries allocated less than 1,000 shares of Common Stock under the Plan are also entitled to purchase in the Purchase and Sale Program additional shares to bring their Trust Interests up to 1,000 shares, subject to a minimum of $250 per purchase (or such lesser amount that would cause the Beneficiary to hold the 1,000 maximum number of Trust Interests). Trust Interests of 70,001, 65,231 and 79,481 for the years ended December 31, 2013, 2012 and 2011, respectively, were issued for this purpose. The number of Trust Interests allocated to Beneficiaries will be adjusted for any shares of Common Stock purchased or sold in the Purchase and Sale Program such that the Trust Interests held by a Beneficiary will always equal the number of shares of Common Stock allocated to the Beneficiary.