In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of MLIC’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that MLIC remains liable for “market conduct claims” related to certain individual life insurance policies sold by MLIC that were subsequently transferred to Sun Life. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted MLIC’s motion for summary judgment. In September 2010, Sun Life notified MLIC that a purported class action lawsuit was filed against Sun Life in Toronto alleging sales practices claims regarding the policies sold by MLIC and transferred to Sun Life (the “Ontario Litigation”). On August 30, 2011, Sun Life notified MLIC that another purported class action lawsuit was filed against Sun Life in Vancouver, BC alleging sales practices claims regarding certain of the same policies sold by MLIC and transferred to Sun Life. Sun Life contends that MLIC is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. In September 2018, the Court of Appeal for Ontario affirmed the lower court’s decision to not certify the sales practices claims in the Ontario Litigation. These sales practices cases against Sun Life are ongoing, and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Plaintiff filed this class action lawsuit on behalf of persons for whom MLIC established a Total Control Account (“TCA”) to pay death benefits under an ERISA plan. The action alleges that MLIC’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates MLIC’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that MLIC realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied MLIC’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.
In 2018, the Company announced that it identified a material weakness in its internal control over financial reporting related to the practices and procedures for estimating reserves for certain group annuity benefits. The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal actions relating to these issues. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable escheat, tax, securities, ERISA, or other laws or regulations. The Company could incur significant costs in connection with these actions.
The New York Department of Financial Services examined these issues and other unrelated issues as part of its quinquennial exam and entered into a consent order with MLIC on January 28, 2019. The Division of Enforcement of the SEC is also investigating this issue and several additional regulators have made similar inquiries. It is possible that other jurisdictions may pursue similar investigations or inquiries.
In the Matter of MetLife, Inc. (Mass. Sec. Div., filed June 25, 2018)
In 2018, the Company announced that it identified a material weakness in its internal control over financial reporting related to the calculation of reserves associated with certain variable annuity guarantees assumed from the former operating joint venture in Japan. The Division of Enforcement of the SEC is investigating this issue and the Company has informed other regulators. It is possible that other regulators may pursue similar investigations or inquiries. The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal actions relating to these issues. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable laws or regulations. The Company could incur significant costs in connection with these actions.
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $4.0 billion and $3.4 billion at December 31, 2018 and 2017, respectively.
The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $7.7 billion and $6.1 billion at December 31, 2018 and 2017, respectively.
On February 15, 2019, MetLife, Inc. announced a first quarter 2019 dividend of $0.25 per share, for a total of $6 million, on its Series A preferred stock, subject to the final confirmation that it has met the financial tests specified in the certificate of designation for the Series A preferred stock, which the Company anticipates will be made and announced on or about March 5, 2019. The dividend will be payable on March 15, 2019 to shareholders of record as of February 28, 2019.
In 2019, through February 14, 2019, MetLife, Inc. repurchased 1,947,100 shares of its common stock in the open market for $85 million.
The Unit-linked and FVO Securities are primarily equity securities (including mutual funds) and fixed maturity securities AFS. Amortized cost for fixed maturity securities AFS and mortgage loans represents original cost reduced by repayments, valuation allowances and impairments from other-than-temporary declines in estimated fair value that are charged to earnings and adjusted for amortization of premium or accretion of discount; for equity securities, cost represents original cost; for real estate, cost represents original cost reduced by impairments and depreciation; for real estate joint ventures and other limited partnership interests, cost represents original cost reduced for impairments or original cost adjusted for equity in earnings and distributions.
Interest income earned on loans to subsidiaries of $3 million, $44 million and $64 million for the years ended December 31, 2018, 2017 and 2016, respectively, is included in net investment income.
In May 2018, $500 million in senior notes previously issued by MetLife, Inc. to MLIC and other subsidiaries were redenominated to new 54.6 billion Japanese yen senior notes. The 54.6 billion Japanese yen senior notes mature in December 2021 and bear interest at a rate per annum of 3.14%, payable semi-annually.
In April 2018, $500 million in senior notes previously issued by MetLife, Inc. to MLIC and other subsidiaries were redenominated to new 53.7 billion Japanese yen senior notes. The 53.7 billion Japanese yen senior notes mature in July 2021 and bear interest at a rate per annum of 2.97%, payable semi-annually.
In February 2017, in connection with the Separation, MetLife, Inc. exchanged $750 million aggregate principal amount of its 9.250% Fixed-to-Floating Rate Junior Subordinated Debentures due 2068 for $750 million aggregate liquidation preference of the 9.250% Fixed-to-Floating Rate Exchangeable Surplus Trust Securities of the Trust. As a result of the exchange, MetLife, Inc. became the sole beneficial owner of the Trust, a SPE, which issued the exchangeable surplus trust securities to third party investors. In March 2017, MetLife, Inc. dissolved the Trust and became the direct holder of $750 million 8.595% surplus notes previously held by the Trust that were issued by Brighthouse Insurance. In June 2017, MetLife, Inc. forgave Brighthouse Insurance’s obligation to pay the principal amount of such surplus notes.