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 escheatment of Trust Shares and (iii) the impact of withdrawals by Beneficiaries from the Trust. 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 issuances and redemptions under the Purchase and Sale Program, a decrease of 3,513,708 Trust Interests due to escheatment of Trust Shares and a decrease of 813,016 Trust Interests due to withdrawals by Beneficiaries from the Trust. Net redemptions by Beneficiaries through the Purchase and Sale Program, escheatment of unclaimed cash and Trust Shares and withdrawals by Beneficiaries from the Trust, resulted in decreases in net assets for the year ended December 31, 2012 of $88 million, $50 million and $12 million, respectively. Net investment income of $151 million, which consists of dividends received from MetLife, Inc. on its Common Stock, 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.
Financial Statements at December 31, 2012 and 2011 and for the years ended December 31, 2012, 2011 and 2010:
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 212,891,322 at December 31, 2011 to 202,335,289 at December 31, 2012. 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 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;
(v) Escheated Trust Shares are recorded as reductions in Trust Interests at cost and classified as Trust Interests escheated.
The Trust will be terminated on the first to occur (each, a “Termination Event”) of (i) the 90th day after the date on which the Trustee shall have received notice from MetLife, Inc. that the number of Trust Shares held by the Trust is equal to 10% or less of the number of issued and outstanding shares of Common Stock or (ii) the date on which the last Trust Share shall have been withdrawn, distributed or exchanged. The Trust may be terminated earlier upon the first to occur of any of the following (each, an “Early Termination Event”):
Additionally, on the Acquisition Date, MetLife, Inc. issued 40,000,000 common equity units which consisted of three purchase contracts (“Series C Purchase Contracts,” “Series D Purchase Contracts” and “Series E Purchase Contracts”) obligating the holder to purchase, on each of three specified future settlement dates, a variable number of shares of Common Stock for a fixed price. In October 2012, on the first settlement date, MetLife, Inc. delivered 28,231,956 shares of newly issued Common Stock to settle the Series C Purchase Contracts. MetLife, Inc. will issue between 45.2 million and 56.5 million shares of Common Stock, subject to certain adjustments, to settle the Series D Purchase Contracts and Series E Purchase Contracts on the two remaining specified future dates expected to occur on September 11, 2013 and October 8, 2014, subject to deferral under certain circumstances.
The number of Trust Shares declined to 202,335,289 at December 31, 2012 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, 2012 decreased to 18.5% as a result of these withdrawals, transactions and escheatments, as well as due to the Common Stock issuances by MetLife, Inc. described above.
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 6,294,540, 6,299,413 and 6,956,541 were redeemed for this purpose, which generated net realized investment gains of $127,560 thousand, $168,290 thousand and $181,271 thousand for the years ended December 31, 2012, 2011 and 2010, 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 65,231, 79,481 and 60,142 for the years ended December 31, 2012, 2011 and 2010, 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.
In January 2013, MetLife, Inc. transitioned to paying dividends on its Common Stock quarterly. On January 4, 2013, MetLife, Inc. announced a first quarter 2013 dividend on its Common Stock of $0.185 per share. The dividends were paid on March 13, 2013 to shareholders of record as of February 6, 2013. The aggregate dividend payment to Beneficiaries was $37,269 thousand.