The following table sets forth selected financial data for the Trust. The selected financial data for the years ended December 31, 2013, 2012 and 2011 and at December 31, 2013 and 2012 has been derived from the Trust’s audited financial statements included elsewhere herein. The financial data for the years ended December 31, 2010 and 2009 and at December 31, 2011, 2010 and 2009 has been derived from the Trust’s audited financial statements not included herein. The following changes in net assets data, balance sheet data and other data have been prepared in conformity with accounting principles generally accepted in the United States of America. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited financial statements and related notes 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., 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 Computershare Inc., 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, 2013 and 2012 was 190,935,381 and 202,335,289, respectively. The decrease of 11,399,908 in the number of Trust Interests is primarily attributable to net Trust Interests redeemed, Trust Interests withdrawn and Trust Interests escheated. 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 increased $27 million, or less than 1%, to $6,665 million at December 31, 2012 from $6,638 million at December 31, 2011. This increase is primarily due to a change 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 $176 million from the prior year. A net reduction of 10,556,033 Trust Interests resulted from a net decrease of 6,229,309 Trust Interests in connection with redemptions and issuances under the Purchase and Sale Program, a decrease of 813,016 Trust Interests due to withdrawals by Beneficiaries from the Trust, and a decrease of 3,513,708 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, 2012 of $88 million, $12 million and $50 million, respectively. Net investment income of $151 million, which consisted of Common Stock dividends received from MetLife, Inc., and net realized investment gains of $128 million recognized on the sale of Trust Shares sold in the Purchase and Sale Program, were fully allocated to Beneficiaries.
We have audited the accompanying statements of assets and liabilities of the MetLife Policyholder Trust (the “Trust”) as of December 31, 2013 and 2012, and the related statements of operations and changes in net assets for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
The MetLife Policyholder Trust (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., 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 Computershare Inc., 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 Trust Shares (as defined below) and certain closely related activities, such as distributing cash dividends. The Trust has no employees.
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 MetLife, Inc., 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, MetLife, Inc. 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 net decrease in the number of Trust Shares from 202,335,289 at December 31, 2012 to 190,935,381 at December 31, 2013. See “- Termination of the Trust.”
(ii)Gains (losses) on Trust Shares withdrawn from the Trust and sold for cash through the Purchase and Sale Program are recorded as net realized investment gains (losses) relating to distributions to holders of Trust Interests and represent the difference between the sales proceeds and the cost basis of such shares. The cost basis of such shares are recorded as a reduction in Trust Interests at cost and classified as Trust Interests redeemed;
The Trust Agreement provides that MetLife, Inc. shall pay, or reimburse directly, each of the Trustee and the Custodian for, all costs and expenses relating to the Trust, in the case of the Trustee, and relating to the holding of Trust Interests, in the case of the Custodian, including, but not limited to, the fees and expenses as provided in the Trust Agreement. MetLife, Inc. pays the Trustee an annual fee of $50 thousand. MetLife, Inc. paid to the Trustee $24 thousand, $43 thousand and $34 thousand for out-of-pocket expenses for the years ended December 31, 2013, 2012 and 2011, respectively. MetLife, Inc. paid to the Trust’s independent auditors $66 thousand, $66 thousand and $43 thousand for audit fees for the years ended December 31, 2013, 2012 and 2011, respectively. None of the aforementioned fees and expenses are included in the Trust’s financial statements. MetLife, Inc. also provides the Trustee with certain management and administrative services.
(i)on the 90th day after the date on which the Trustee receives written notice from MetLife, Inc., given at MetLife, Inc.’s discretion at any time, that the number of Trust Shares is 25% or less of the number of issued and outstanding shares of Common Stock;
(iv)on the date on which there is an entry of a final order for termination or dissolution of the Trust or similar relief by a court of competent jurisdiction.
Additionally, on the Acquisition Date, MetLife, Inc. issued 40.0 million common equity units which consisted in part of three series of stock purchase contracts obligating the holder to purchase, on each of three future settlement dates, a variable number of shares of Common Stock for a fixed price. In September 2013 and October 2012, MetLife, Inc. issued 22.7 million and 28.2 million new shares of its Common Stock, respectively, to settle two series of the stock purchase contracts. MetLife, Inc. will issue between 22.8 million and 28.5 million shares of Common Stock, subject to certain adjustments, to settle the remaining series of stock purchase contracts, which is expected to occur on October 8, 2014, subject to deferral under certain circumstances.
On January 6, 2014, MetLife, Inc. announced a first quarter 2014 dividend on its Common Stock of $0.275 per share. The dividends were paid on March 13, 2014 to shareholders of record as of February 6, 2014. The aggregate dividend payment to Beneficiaries was $52,286 thousand.