Company's stock, as approved by the Holding Company's Board of Directors. Beginning in 2005, no further LTPCP target compensation amounts were set. Instead, certain members of management were awarded Performance Shares under the 2005 Stock Plan. Participants are awarded an initial target number of Performance Shares with the final number of Performance Shares payable being determined by the product of the initial target multiplied by a factor of 0.0 to 2.0. The factor applied is based on measurements of the Holding Company's performance with respect to (i) change in annual net operating earnings per share; and (ii) proportionate total shareholder return, as defined, with reference to the three-year performance period relative to other companies in the Standard and Poor's Insurance Index with reference to the same three-year period. Performance Share awards will normally vest in their entirety at the end of the three-year performance period (subject to certain contingencies) and will be payable entirely in shares of the Holding Company's stock. On April 15, 2005, the Company granted 1,036,950 Performance Shares for which the total fair value on the date of grant was approximately $40 million. For the years ended December 31, 2005, 2004 and 2003, compensation expense related to the LTPCP and Performance Shares was $70 million, $49 million, and $45 million, respectively.
The NAIC adopted the Codification of Statutory Accounting Principles ("Codification") in 2001. Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The New York State Department of Insurance has adopted Codification with certain modifications for the preparation of statutory financial statements of insurance companies domiciled in New York. Modifications by the various state insurance departments may impact the effect of Codification on the statutory capital and surplus of the Holding Company's insurance subsidiaries.
Statutory net income of Metropolitan Life, a New York domiciled insurer, was $2,155 million, $2,648 million and $2,169 million for the years ended December 31, 2005, 2004 and 2003, respectively. Statutory capital and surplus, as filed with the New York State Department of Insurance, was $8,639 million and $8,804 million at December 31, 2005 and 2004, respectively.
Statutory net income of TIC, a Connecticut domiciled insurer, from the date of purchase was $470 million for the six month period ended December 31, 2005. Statutory capital and surplus, as filed with the Connecticut Insurance Department, was $4,081 million at December 31, 2005.
Statutory net income of MTL (including MIAC), which was merged into MTL in 2004, as filed with the Delaware Insurance Department, was $353 and $144 million for the years ended December 31, 2005 and 2004, respectively. Statutory net income of MIAC, as filed with the Delaware Insurance Department, was $341 million for the year ended December 31, 2003. Statutory capital and surplus of MTL, as filed, which includes MIAC, was $690 million and $1,195 million as of December 31, 2005 and 2004, respectively.
The following table sets forth the reclassification adjustments required for the years ended December 31, 2005, 2004 and 2003 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
Economic Capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The Economic Capital model accounts for the unique and specific nature of the risks inherent in Metlife's businesses. As a part of the economic capital process a portion of net investment income is credited to the segments based on the level of allocated equity.
Institutional offers a broad range of group insurance and retirement & savings products and services, including group life insurance, non-medical health insurance, such as short and long-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Auto & Home provides personal lines property and casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. International provides life insurance, accident and health insurance, annuities and retirement & savings products to both individuals and groups. Through the Company's majority-owned subsidiary, RGA, Reinsurance provides reinsurance of life and annuity policies in North America and various international markets. Additionally, reinsurance of critical illness policies is provided in select international markets.
Corporate & Other contains the excess capital not allocated to the business segments, various start-up entities, including MetLife Bank and run-off entities, as well as interest expense related to the majority of the Company's outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of all intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings, as well as intersegment transactions. Additionally, the Company's asset management business, including amounts reported as discontinued operations, is included in the results of operations for Corporate & Other. See Note 19 for disclosures regarding discontinued operations, including real estate.
In the second quarter of 2005, the Company sold its One Madison Avenue and 200 Park Avenue properties in Manhattan, New York for $918 million and $1.72 billion, respectively, resulting in gains, net of income taxes, of $431 million and $762 million, respectively. The gains are included in income from discontinued operations in the accompanying consolidated statements of income. In connection with the sale of the 200 Park Avenue property, the Company has retained rights to existing signage and is leasing space for associates in the property for 20 years with optional renewal periods through 2205.
On September 29, 2005, the Company completed the sale of MetLife Indonesia to a third party resulting in a gain upon disposal of $10 million, net of income taxes. As a result of this sale, the Company recognized income from discontinued operations of $5 million, net of income taxes, for the year ended December 31, 2005. The Company reclassified the assets, liabilities and operations of MetLife Indonesia into discontinued operations for all periods presented.
period in 2005. In the fourth quarter of 2005, upon finalization of the computation, the Company received a payment of $12 million, net of income taxes, due to the retention of these specific customer accounts. The Company reclassified the assets, liabilities and operations of SSRM into discontinued operations for all periods presented. Additionally, the sale of SSRM resulted in the elimination of the Company's Asset Management segment. The remaining asset management business, which is insignificant, has been reclassified into Corporate & Other. The Company's discontinued operations for the year ended December 31, 2005 also includes expenses of approximately $6 million, net of income taxes, related to the sale of SSRM.
The operations of SSRM include affiliated revenues of $5 million, $59 million and $54 million for the years ended December 31, 2005, 2004 and 2003, respectively, related to asset management services provided by SSRM to the Company that have not been eliminated from discontinued operations as these transactions continue after the sale of SSRM. The following tables present the amounts related to operations and financial position of SSRM that have been combined with the discontinued real estate operations in the consolidated income statements:
The fair value of policyholder account balances which have final contractual maturities are estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. The fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender.
On February 21, 2006, the Holding Company's board of directors declared dividends of $0.3432031 per share, for a total of $9 million, on its Series A preferred shares, and $0.4062500 per share, for a total of $24 million, on its Series B preferred shares, subject to the final confirmation that it has met the financial tests specified in the Series A and Series B preferred shares, which the Holding Company anticipates will be made on or about March 5, 2006, the earliest date permitted in accordance with the terms of the securities. Both dividends will be payable March 15, 2006 to shareholders of record as of February 28, 2006.
CONSOLIDATED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN AFFILIATES DECEMBER 31, 2005 (IN MILLIONS)
(1) The Company's trading securities portfolio is mainly comprised of fixed maturities. Cost for fixed maturities and mortgage and consumer loans represents original cost reduced by repayments, net valuation allowances and writedowns from other-than-temporary declines in value and adjusted for amortization of premiums or accretion of discount; for equity securities, cost represents original cost reduced by writedowns from other-than-temporary declines in value; for real estate, cost represents original cost reduced by writedowns and adjusted for valuation allowances and depreciation; cost for real estate joint ventures and other limited partnership interests represents original cost reduced for other- than-temporary impairments or original cost adjusted for equity in earnings and distributions.
As described above in Note 1 and in Note 2 to the Consolidated Financial Statements, the Holding Company acquired Travelers on July 1, 2005. Goodwill is the excess of cost over the fair value of net assets acquired. In connection with the Travelers acquisition, the Company allocated purchase price based upon the valuation of the tangible and intangible assets acquired as well as the related anticipated expense synergies, operational changes and future sales resulting from the business combination which were identified in determining the overall purchase price to be paid to Citigroup. Accordingly, a portion of the purchase price is presently retained at the Holding Company as the benefits derived from the acquisition are expected to occur within legal entities already owned by the Holding Company as a result of the integration of the newly acquired Travelers' business and the existing MetLife operations. Changes in goodwill are as follows:
approximately $12 million of issuance costs which have been capitalized and included in other assets. These costs are being amortized using the effective interest method over the respective term of the related senior notes.
At December 31, 2005, the Holding Company's $961 million short-term debt consisted of commercial paper. The debt was outstanding for an average of 80 days with a weighted average interest rate of 4.2%. The Holding Company had no short-term debt outstanding at December 31, 2004.
The primary source of the Holding Company's liquidity is dividends it receives from its insurance subsidiaries. The Holding Company's insurance subsidiaries are subject to regulatory restrictions on the payment of dividends imposed by the regulators of their respective domiciles. The dividend limitation for U.S. insurance subsidiaries is based on the surplus to policyholders as of the immediately preceding calendar year and statutory net gain from operations for the immediately preceding calendar year.
The maximum amount of dividends which could be paid to the Holding Company by Metropolitan Life, The Travelers Insurance Company ("TIC"), a wholly-owned subsidiary of the Holding Company, Metropolitan Property and Casualty Insurance Company ("MPC"), a wholly-owned subsidiary of the Holding Company and Metropolitan Tower Life Insurance Company ("MTL"), a wholly-owned subsidiary of the Holding Company in 2005, without prior regulatory approval, was $880 million, $0 million, $187 million and $119 million, respectively. During the year ended December 31, 2005, Metropolitan Life paid $880 million in ordinary dividends for which prior insurance regulatory approval was not required and $2,320 million in special dividends as approved by the New York Superintendent of Insurance. TIC has not paid any dividends since its acquisition by the Holding Company and may not make dividend payments for a two-year period following the date of acquisition without regulatory approval. MPC paid $400 million in special dividends, as approved by the Rhode Island Superintendent of Insurance, during the year ended December 31, 2005. MTL paid $54 million in ordinary dividends for which prior insurance regulatory approval was not required and $873 million in special dividends as approved by the Delaware Superintendent of Insurance during the year ended December 31, 2005. MetLife Mexico, S.A., a wholly-owned subsidiary of the Holding Company, paid dividends to the Holding Company of $276 million during the year ended December 31, 2005. In addition, various subsidiaries paid $19 million in total to the Holding Company for the year ended December 31, 2005. The maximum amount of dividends which Metropolitan Life, TIC, MPC and MTL may pay to the Holding Company in 2006 without prior regulatory approval is $863 million, $0 million, $178 million, and $85 million, respectively. If paid before a specified date in 2006, some or all of an otherwise ordinary dividend may be deemed special by the relevant regulatory authority and require approval.
In connection with the acquisition of Travelers, support agreements regarding certain subsidiaries of the Holding Company were provided to various insurance regulators. The Holding Company committed to the Delaware Department of Insurance, in the event that at December 31, 2005 the total adjusted capital of MTL is below 250% of the company action level RBC, the Holding Company would make a capital contribution to MTL in an amount that would make up for such shortfall. Pursuant to this commitment, during 2005, the Holding Company made a capital contribution of $50 million to MTL. The Holding Company also committed to the South Carolina Department of Insurance to take necessary action to maintain the minimum capital and surplus of TLARC at the greater of $250,000 or 10% of net loss reserves (loss reserves less deferred acquisition costs).
(1) Amounts are included within the Future Policy Benefits, Other Policyholder Funds and Policyholder Dividend Obligation column.
CONSOLIDATED REINSURANCE FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN MILLIONS)