Collateral Financing Arrangements

12 Months Ended

Dec. 31, 2024

17. Collateral Financing Arrangement

Information related to the collateral financing arrangement associated with the closed block (See Note 10) was as follows at:


	December 31,
	2024		2023
	(In millions)
Surplus notes outstanding (1)	$	476	$	637
Receivable from unaffiliated financial institution (1)	$	62	$	85
Pledged collateral (2)	$	—	$	10
Assets held in trust (2)	$	1,330	$	1,397

__________________

(1)At carrying value.

(2)At estimated fair value.

Interest expense on the collateral financing arrangement was $38 million, $44 million and $22 million for the years ended December 31, 2024, 2023 and 2022, respectively, which is included in other expenses.

In December 2007, MLIC reinsured a portion of its closed block liabilities to MetLife Reinsurance Company of Charleston (“MRC”), a wholly-owned subsidiary of MetLife, Inc. In connection with this transaction, MRC issued, to investors placed by an unaffiliated financial institution, $2.5 billion in aggregate principal amount of 35-year surplus notes to provide statutory reserve support for the assumed closed block liabilities. Interest on the surplus notes accrued at an annual rate of three-month London Interbank Offered Rate (“LIBOR”) plus 0.55%, payable quarterly. For interest periods that commenced after June 30, 2023, three-month LIBOR was replaced with the CME Term Secured Overnight Financing Rate (“SOFR”) published for a three-month tenor plus a spread adjustment of 0.26161%. The ability of MRC to make interest and principal payments on the surplus notes is contingent upon South Carolina regulatory approval.

Simultaneously with the issuance of the surplus notes, MetLife, Inc. entered into an agreement with the unaffiliated financial institution, under which MetLife, Inc. received interest payable by MRC on the surplus notes in exchange for the payment of three-month LIBOR plus 1.12%, payable quarterly on such amount as adjusted, as described below. For interest periods that commenced after June 30, 2023, three-month LIBOR under the agreement was replaced with compounded SOFR calculated in arrears plus a spread adjustment of 0.26161%. MetLife, Inc. may also be required to pledge collateral or make payments to the unaffiliated financial institution related to any decline in the estimated fair value of the surplus notes. Any such payments are accounted for as a receivable and included in other assets on the Company’s consolidated balance sheets and do not reduce the principal amount outstanding of the surplus notes. Such payments, however, reduce the amount of interest payments due from MetLife, Inc. under the agreement. Any payment received from the unaffiliated financial institution reduces the receivable by an amount equal to such payment and also increases the amount of interest payments due from MetLife, Inc. under the agreement. In addition, the unaffiliated financial institution may be required to pledge collateral to MetLife, Inc. related to any increase in the estimated fair value of the surplus notes.

For the years ended December 31, 2024, 2023 and 2022, following regulatory approval, MRC repurchased $161 million, $79 million and $50 million, respectively, in aggregate principal amount of the surplus notes. Payments made by the Company in 2024, 2023 and 2022 associated with the repurchases were exclusive of accrued interest on the surplus notes. In connection with the repurchases for the years ended December 31, 2024, 2023 and 2022, the Company received payments in the aggregate amount of $23 million, $8 million and $7 million, respectively, from the unaffiliated financial institution, which reduced the amount receivable from the unaffiliated financial institution by the same amounts. No other payments related to an increase or decrease in the estimated fair value of the surplus notes were made by MetLife, Inc. or received from the unaffiliated financial institution for the years ended December 31, 2024, 2023 or 2022.

A majority of the proceeds from the offering of the surplus notes was placed in a trust, which is consolidated by the Company, to support MRC’s statutory obligations associated with the assumed closed block liabilities. The assets are principally invested in fixed maturity securities AFS and are presented as such within the Company’s consolidated balance sheets, with the related income included within net investment income on the Company’s consolidated statements of operations.