The changes in net assets data for the years ended December 31, 2019, 2018 and 2017, and the balance sheet data at December 31, 2019 and 2018 have been derived from the Trust’s audited financial statements included elsewhere herein. The changes in net assets data for the years ended December 31, 2016 and 2015, and the balance sheet data at December 31, 2017, 2016 and 2015 have also been derived from the Trust’s audited financial statements for such periods but are not included herein. 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.
For purposes of this discussion, “Trust” refers to the MetLife Policyholder Trust. This discussion should be read in conjunction with “Note Regarding Forward-Looking Statements,” “Risk Factors,” “Selected Financial Data,” “Quantitative and Qualitative Disclosures About Market Risk” and the Trust’s financial statements included elsewhere herein.
The number of Trust Interests outstanding at December 31, 2019 and 2018 was 140,694,733 and 148,035,667, respectively. The decrease of 7,340,934 in the number of Trust Interests is primarily attributable to Trust Interests redeemed, Trust Interests withdrawn and Trust Interests escheated. Net assets of the Trust consist solely of Trust Shares which 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.
Year ended December 31, 2019 compared with the year ended December 31, 2018
Net assets in the Trust decreased $1.8 billion, or 23%, to $6.1 billion at December 31, 2018 from $7.8 billion at December 31, 2017. This decrease was primarily due to a decrease in net unrealized investment gains on the Trust Shares, as well as (i) net activity under the Purchase and Sale Program; (ii) the impact of withdrawals by Beneficiaries from the Trust; and (iii) the impact of escheatment of unclaimed cash and Trust Shares. Net unrealized investment gains, which represent the difference between the estimated fair value and the cost basis of the Trust Shares, decreased $1.7 billion from the prior year. A net reduction of 7,211,254 Trust Interests resulted from (i) a net decrease of 5,069,615 Trust Interests in connection with redemptions and issuances under the Purchase and Sale Program, (ii) a decrease of 1,274,820 Trust Interests due to withdrawals by Beneficiaries from the Trust, and (iii) a decrease of 866,819 Trust Interests due to escheatment of Trust Shares. The net reduction of Trust Interests 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, 2018 of $63 million, $16 million and $11 million, respectively. Net investment income of $252 million, which consisted of Common Stock dividends received from MetLife, Inc., and net realized investment gains of $171 million recognized on the sale of Trust Shares sold in the Purchase and Sale Program, were fully allocated to Beneficiaries.
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.
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 $34 thousand, $40 thousand and $39 thousand for out-of-pocket expenses for the years ended December 31, 2019, 2018 and 2017, respectively. MetLife, Inc. paid to the Trust’s independent auditors $59 thousand for audit fees for each of the years ended December 31, 2019, 2018 and 2017. None of the aforementioned fees and expenses is included in the Trust’s financial statements. MetLife, Inc. also provides the Trustee with certain management and administrative services.
Pursuant to the Trust Agreement, the Trust is eligible to be terminated at MetLife, Inc.’s discretion, as the Trust Shares constituted less than 25% of the number of issued and outstanding shares of Common Stock at December 31, 2019. As of December 31, 2019, MetLife, Inc. had not advised the Trustee of any intention to voluntarily terminate the Trust.
On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”). MetLife, Inc. common shareholders, including the Trust and, by extension, the Beneficiaries, received a distribution of one share of Brighthouse Financial, Inc. common stock for every 11 shares of Common Stock they owned as of 5:00 p.m., New York City time, on the July 19, 2017 record date (the “distribution”). Beneficiaries who beneficially owned less than 11 shares of Common Stock, or others who would have otherwise received fractional shares, received cash. MetLife, Inc. distributed 96,776,670 of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing approximately 80.8% of those shares.
Following the distribution, a portion of the cost basis of the Trust Shares was allocated to the Brighthouse Financial, Inc. common stock distributed to Beneficiaries. Of the allocated cost basis, $217 million was attributable to whole shares which were recorded as a withdrawal of Trust Interests for the year ended December 31, 2017 and $24 million was attributable to the fractional shares that Beneficiaries would have otherwise received in the distribution. The cash received in lieu of such fractional shares of $83 million was recorded as a redemption of Trust Interests, net of the $24 million cost basis allocated to such fractional shares, resulting in net realized investment gains of $59 million for the year ended December 31, 2017. At December 31, 2017, the Trust did not hold any shares of Brighthouse Financial, Inc. common stock.
For the years ended December 31, 2019, 2018 and 2017, MetLife, Inc. repurchased 49,131,501 shares, 88,029,138 shares and 56,599,540 shares under these repurchase authorizations for $2.3 billion, $4.0 billion and $2.9 billion, respectively. See Note 5 for information regarding subsequent Common Stock repurchases.
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.” The Trust Agreement further provides that pending such distribution, cash dividends (unless distributed directly by MetLife, Inc. to Beneficiaries) shall be invested by the Trustee in short-term obligations of or guaranteed by the United States, or any agency or instrumentality thereof, and in certificates of deposit of any bank or trust company having, at the time of the investment, a combined capital and surplus not less than $500,000,000. Dividends or other distributions in Common Stock will be allocated to the Beneficiaries in proportion to their Trust Interests and held by the Trustee as Trust Shares. Generally, all other distributions by MetLife, Inc. to its stockholders will be held and distributed by the Trustee to the Custodian and by the Custodian to the Beneficiaries in proportion to their Trust Interests within 60 days of receipt of such distribution by the Trustee, subject to limited exceptions. All security transactions are recorded on a trade date basis. See Note 5 for information on Common Stock dividends declared and paid subsequent to December 31, 2019.
The Trust Agreement provides the Trustee with directions as to the manner in which to vote, assent or consent the Trust Shares at all times during the term of the Trust. On all matters brought for a vote before the stockholders of MetLife, Inc., with the exception of a Beneficiary Consent Matter (as defined in the Trust Agreement), the Trustee will vote or abstain from voting in accordance with the recommendation given by the Board of Directors of MetLife, Inc. to its stockholders or, if no such recommendation is given, as directed by the Board. On all Beneficiary Consent Matters, the Trustee will vote all of the Trust Shares in favor of, in opposition to or abstain from the matter in the same ratio as the Trust Interests of the Beneficiaries that returned voting instructions to the Trustee indicated preferences for voting in favor of, in opposition to or abstaining from such matter. The Trust Agreement also contains provisions allowing Beneficiaries to instruct the Custodian to withdraw their allocated Trust Shares to participate in any tender or exchange offer for the Common Stock and to make any cash or share election, or perfect any dissenter’s rights, in connection with a merger of MetLife, Inc.
In 2020, through February 14, 2020, MetLife, Inc. repurchased 973,315 shares of Common Stock in the open market for $51 million.
On January 7, 2020, the MetLife, Inc.’s Board of Directors declared a first quarter 2020 Common Stock dividend of $0.44 per share payable on March 13, 2020 to shareholders of record as of February 4, 2020. The aggregate dividend payment to Beneficiaries was $62 million.