Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the MetLife Policyholder Trust’s actual future results. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in the Trust’s and MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission (“SEC”). These factors include: (i) changes in state unclaimed property laws; (ii) adverse results or other consequences from litigation, arbitration or regulatory investigations; (iii) the effects of business disruption or economic contraction due to terrorism or other hostilities; and (iv) other risks and uncertainties described from time to time in the Trust’s and MetLife, Inc.’s filings with the SEC.
Net assets in the Trust decreased $7,601 million, or 47%, to $8,461 million for the year ended December 31, 2008 from $16,062 million for the comparable 2007 period. This decrease is primarily due to a change in net
unrealized investment gains on the Trust Shares, partially offset by (i) the impact of withdrawals by Beneficiaries from the Trust, (ii) activity under the MetLife, Inc. Purchase and Sale Program (the “Purchase and Sale Program”), and (iii) the impact of tenders by Beneficiaries of Trust Shares pursuant to the Holding Company’s split-off of its majority-owned subsidiary, Reinsurance Group of America, Incorporated (“RGA”), in September 2008. Net unrealized investment gains, which represent the difference between the fair value and the cost basis of the Trust Shares, decreased $7,348 million from the prior year. A net reduction of 17,931,217 Trust Interests resulted from a decrease of 7,983,526 Trust Interests due to withdrawals by Beneficiaries from the Trust, a net decrease of 9,947,691 Trust Interests in connection with issuances and redemptions under the Purchase and Sale Program and a net decrease of 1,781,272 Trust Interests in connection with tenders by Beneficiaries of Trust Shares pursuant to the Holding Company’s split-off of RGA. The Trust Interests withdrawn primarily reflects the escheatment of unclaimed cash and shares of Common Stock. As part of Metropolitan Life’s demutualization and the Holding Company’s initial public offering, the Holding Company issued shares of its Common Stock to certain eligible policyholders of Metropolitan Life. Any unclaimed cash and Common Stock become property of the state of last known residence, as is the case with other types of unclaimed property. The schedule by which unclaimed property is escheated varies by state, but is generally within three to five years of abandonment. It is anticipated that the number of Trust Interests will continue to decrease over time as state dormancy periods expire. Beginning on April 7, 2001, Beneficiaries were able to withdraw all, but generally, not less than all, of their allocated shares of Common Stock in the Trust at any time by providing written notice to the Custodian. Net redemptions by Beneficiaries through the Purchase and Sale Program, withdrawals by Beneficiaries from the Trust and tenders by Beneficiaries of Trust Shares pursuant to the Holding Company’s split-off of RGA resulted in a $138 million, $114 million and $25 million decrease in net assets, respectively, for the year ended December 31, 2008. Net investment income of $180 million, which consists of dividends received from the Holding Company on its Common Stock, and net realized investment gains recognized on the sale of Trust Shares sold in the Purchase and Sale Program of $394 million, were fully distributed to Beneficiaries.
Net assets in the Trust decreased $279 million, or 2%, to $16,062 million for the year ended December 31, 2007 from $16,340 million for the comparable 2006 period. This decrease is primarily due to a change in net unrealized investment gains on the Trust Shares, partially offset by (i) the impact of withdrawals by Beneficiaries from the Trust, and (ii) activity under the Purchase and Sale Program. Net unrealized investment gains, which represent the difference between the fair value and the cost basis of the Trust Shares, decreased $52 million from the prior year. A net reduction of 16,249,015 Trust Interests resulted from a decrease of 6,012,285 Trust Interests due to withdrawals by Beneficiaries from the Trust and a net decrease of 10,236,730 Trust Interests in connection with issuances and redemptions under the Purchase and Sale Program. The Trust Interests withdrawn primarily reflects the escheatment of unclaimed cash and shares of Common Stock. As part of Metropolitan Life’s demutualization and the Holding Company’s initial public offering, the Holding Company issued shares of its Common Stock to certain eligible policyholders of Metropolitan Life. Any unclaimed cash and Common Stock become property of the state of last known residence, as is the case with other types of unclaimed property. The schedule by which unclaimed property is escheated varies by state, but is generally within three to five years of abandonment. It is anticipated that the number of Trust Interests will continue to decrease over time as state dormancy periods expire. Beginning on April 7, 2001, Beneficiaries were able to withdraw all, but generally, not less than all, of their allocated shares of Common Stock in the Trust at any time by providing written notice to the Custodian. Net redemptions by Beneficiaries through the Purchase and Sale Program and withdrawals by Beneficiaries from the Trust resulted in a $141 million and $86 million decrease in net assets, respectively, for the year ended December 31, 2007. Net investment income of $194 million, which consists of dividends received from the Holding Company on its Common Stock, and net realized investment gains recognized on the sale of Trust Shares sold in the Purchase and Sale Program of $517 million, were fully distributed to Beneficiaries.
We have audited the accompanying statements of assets and liabilities of the MetLife Policyholder Trust (the “Trust”) as of December 31, 2008 and 2007, and the related statements of operations and changes in net assets for each of the three years in the period ended December 31, 2008. 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.
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 the Holding Company, 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, the Holding Company 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), tenders by Beneficiaries of Trust Shares pursuant to the Holding Company’s split-off of its majority-owned subsidiary, Reinsurance Group of America, Incorporated, in September 2008, and escheatment of unclaimed Trust Shares resulted in a decrease in the number of Trust Shares from 260,655,407 at December 31, 2007 to 242,724,190 at December 31, 2008.
The Holding Company pays the Trustee an annual fee of $50,000. The Holding Company also provides the Trustee with minor management and administrative services, the cost of which is not considered material and, therefore, is not included in these financial statements. In addition, the Holding Company will reimburse the Trustee for all reasonable out-of-pocket expenses it incurs in the performance of its duties under the Trust Agreement. However, the Holding Company is not required to reimburse the Trust or Trustee for the expense of mailing to the Custodian any proxy and other materials received by the Trustee from persons other than the Holding Company, including mailings with respect to any Beneficiary Consent Matter. The Holding Company paid to the Trustee $71,539 and $15,938 for out-of-pocket expenses for the years ended December 31, 2008 and 2007, respectively.
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 10,064,054, 10,337,547 and 11,293,360 for the years ended December 31, 2008, 2007 and 2006, respectively, were redeemed for this purpose. 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 116,363, 100,817 and 103,485 for the years ended December 31, 2008, 2007 and 2006, 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.