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Separation
6 Months Ended
Jun. 30, 2017
Separation [Abstract]  
Mergers, Acquisitions and Dispositions Disclosures [Text Block]
3. Separation
Spin-off of Brighthouse
In January 2016, MetLife, Inc. announced its plan to pursue the Separation. MetLife, Inc. subsequently re-segmented the business to be separated and rebranded it as “Brighthouse Financial.”
On June 29, 2017, MetLife, Inc. announced that its Board of Directors had approved the spin-off of its wholly-owned subsidiary, Brighthouse Financial, Inc. (“Brighthouse”). MetLife, Inc. common shareholders will receive a distribution of one share of Brighthouse common stock for every 11 shares of MetLife, Inc. common stock they own. Shareholders of MetLife, Inc. who own less than 11 shares of common stock, or others who would otherwise receive fractional shares, will receive cash. The record date for the distribution was 5:00 p.m., New York City time, on July 19, 2017, and the distribution date will be 5:00 p.m., New York City time, on August 4, 2017. On August 3, 2017, MetLife, Inc. announced that it expects to distribute 96,776,670 of the 119,773,106 shares of Brighthouse common stock, representing approximately 80.8% of those shares. Certain MetLife affiliates hold MetLife common stock and, as a result, will participate in the distribution.
On July 6, 2017, MetLife, Inc. announced that the U.S. Securities and Exchange Commission (“SEC”) has declared Brighthouse’s registration statement on Form 10 effective. Additionally, all required state regulatory approvals have been granted. The Separation remains subject to continuing validity of a ruling from the Internal Revenue Service and an opinion from MetLife’s tax advisor regarding certain U.S. federal income tax matters.
Transactions in Connection with the Spin-off
In connection with the spin-off, the Company completed the following transactions in 2017:
Contributions of Entities, Mergers and Dividend
In April 2017, following receipt of applicable regulatory approvals, MetLife contributed certain captive reinsurance companies to Brighthouse Life Insurance Company (“Brighthouse Insurance”), which were merged into Brighthouse Reinsurance Company of Delaware (“BRCD”), a newly-formed captive reinsurance company that is wholly-owned by Brighthouse Insurance.
On July 27, 2017, MetLife, Inc. contributed the voting common interests of Brighthouse Holdings, LLC, a subsidiary of MetLife, Inc., to Brighthouse. Brighthouse Holdings, LLC is an intermediate holding company, which owns of all of the subsidiaries within Brighthouse.
On August 3, 2017, Brighthouse paid a cash dividend to MetLife, Inc. of $1.8 billion in connection with the Separation.
Termination of Financing Arrangements
In April 2017, MetLife, Inc. and MetLife Reinsurance Company of South Carolina (“MRSC”) terminated the MRSC collateral financing arrangement associated with secondary guarantees. As a result, the $2.8 billion collateral financing arrangement liability outstanding was extinguished utilizing $2.8 billion of assets held in trust with the remaining $590 million of assets held in trust returned to MetLife, Inc. as a cash return of capital from a subsidiary. Total fees associated with the termination were $37 million and were included in other expenses.
In April 2017, MetLife, Inc. and MetLife Reinsurance Company of Vermont terminated the $4.3 billion committed facility, and MetLife, Inc. and MRSC terminated the $3.5 billion committed facility. Total fees associated with the terminations were $257 million and were included in other expenses.
In June 2017, MetLife, Inc. forgave Brighthouse Insurance’s obligation to pay the principal amount of $750 million affiliated surplus notes held by MetLife, Inc. This transaction was a non-cash contribution to Brighthouse Holdings, LLC with a corresponding non-cash capital contribution to Brighthouse Insurance and had no impact on the consolidated financial statements of MetLife. See Note 9.
New Financing Arrangements
In April 2017, BRCD entered into a new financing arrangement with a pool of highly rated third-party reinsurers with a total capacity of $10.0 billion. This financing arrangement consists of credit-linked notes that each has a term of 20 years. At June 30, 2017, there were no drawdowns and there was $8.1 billion of funding available under this financing arrangement.
In June 2017, Brighthouse Holdings, LLC issued 50,000 units of 6.50% fixed rate cumulative preferred units to MetLife, Inc. and in turn MetLife, Inc. sold the preferred units to third-party investors, for net proceeds of $49 million, and recorded the subsidiary preferred units in noncontrolling interests.
In June 2017, Brighthouse issued $1.5 billion of senior notes due in June 2027 (the “2027 Senior Notes”) which bear interest at a fixed rate of 3.70%, payable semi-annually. Also in June 2017, Brighthouse issued $1.5 billion of senior notes due in June 2047 (the “2047 Senior Notes,” and together with the 2027 Senior Notes, the “Senior Notes”) which bear interest at a fixed rate of 4.70%, payable semi-annually. Brighthouse incurred $25 million of related costs which have been capitalized and are being amortized over the terms of the Senior Notes. See “— Senior Notes Guarantee” below for additional information.
In June 2017, subsequent to the issuance of the Senior Notes, the borrowing capacity under Brighthouse’s three-year senior unsecured delayed draw term loan agreement (the “2016 Term Loan Agreement”) was decreased from $3.0 billion to $536 million. On July 21, 2017, concurrently with entering into a new term loan agreement described below, Brighthouse terminated the 2016 Term Loan Agreement without penalty. Brighthouse will expense $7 million of capitalized costs related to the termination in the third quarter of 2017.
On July 21, 2017, Brighthouse entered into a new $600 million senior unsecured delayed draw term loan agreement (the “2017 Term Loan Agreement”). Under the 2017 Term Loan Agreement, Brighthouse may borrow up to a maximum of $600 million which may be used for general corporate purposes, including in connection with the Separation, of which $500 million is available prior to the Separation. The 2017 Term Loan Agreement contains certain covenants that could restrict the operations and use of funds of Brighthouse. On August 2, 2017, Brighthouse borrowed $500 million under the 2017 Term Loan Agreement in connection with the Separation.
Senior Notes Guarantee
In connection with the issuance of the Senior Notes, MetLife, Inc. has initially guaranteed the Senior Notes on a senior unsecured basis (the “Guarantee”). Under the Guarantee, MetLife, Inc. fully and unconditionally guaranteed to each holder of the Senior Notes the full and prompt payment of principal of the Senior Notes, the premium on the Senior Notes, if any, and the interest on the Senior Notes, and all other obligations of Brighthouse under the Senior Notes, when the same become due. The Guarantee will be automatically and unconditionally released upon the completion of both (i) the contribution by MetLife, Inc. of all the voting common interests in Brighthouse Holdings, LLC, including its direct and indirect subsidiaries, to Brighthouse and (ii) the consummation of the transfer by MetLife, Inc. of at least 80.1% of the shares of Brighthouse’s common stock to one or more persons, other than MetLife, Inc. or any of its affiliates, through a spin-off to the holders of MetLife Inc.’s common stock, a public offering of shares in an independent publicly traded company, or a sale ((i) and (ii) together, a “Brighthouse Stock Distribution Event”).
If a Brighthouse Stock Distribution Event has not occurred on or prior to December 31, 2017, Brighthouse must redeem the Senior Notes, in whole, on the tenth business day following December 31, 2017 (the “special mandatory redemption date”). In the event of such a redemption, Brighthouse must redeem the Senior Notes at a special mandatory redemption price of 101% of the then-outstanding aggregate principal amount of the Senior Notes, together with accrued and unpaid interest from the last date on which interest has been paid up to, but excluding, the special mandatory redemption date.
The Senior Notes are direct financial obligations of Brighthouse and the Guarantee is a direct financial obligation of MetLife, Inc.
Termination of Support Agreements
In April 2017, in connection with the contribution of entities, mergers and financing transactions discussed above, MetLife, Inc. terminated various support agreements with the captive reinsurance companies merged into BRCD. See Schedule II included in the 2016 Annual Report for information on the support agreements that were terminated.