|[November 28, 2012]
A.M. Best Affirms Ratings of MetLife, Inc. and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of the
primary life/health insurance subsidiaries of MetLife, Inc.
(MetLife) (New York, NY) [NYSE: MET]. Concurrently, A.M. Best has
affirmed the ICR of "a-" as well as all existing debt ratings of MetLife.
A.M. Best also has affirmed the FSR of A (Excellent) and ICRs of "a+" of
the property/casualty companies consisting of Metropolitan
Property and Casualty Insurance Company (Warwick, RI) and its eight
reinsured subsidiaries. The outlook for all ratings is stable. (See link
below for a detailed listing of the companies and ratings.)
The rating affirmations reflect MetLife's diverse business mix, leading
market position in its core business lines, strong brand recognition,
favorable operating results and significant operating scale. These
strengths are enhanced by proactive de-risking strategies as the company
looks to focus on less capital intensive and market sensitive products.
MetLife also has benefited from significant gains on interest rate
hedges, which have helped to reduce its earnings volatility in the
current low interest rate environment.
Through its broad and diversified distribution channels, MetLife has the
scale and distribution capabilities necessary to maintain its leadership
positions in a number of product lines. Moreover, A.M. Best recognizes
the strong diversity of earnings and revenue generated by its expanded
international operation. In addition, MetLife's ratings reflect some
improvement in its financial leverage and interest coverage ratios.
MetLife maintains a very strong liquidity position at the holding
company and has the resources to fund upcoming debt maturities without
accessing the capital markets. Additionally, MetLife has recently issued
debt at very favorable rates, taking full advantage of the current
historically low interest rate environment.
Partially offsetting these positive rating factors is MetLife's overall
risk appetite and risk-adjusted capital position (as measured by Best's
Capital Adequacy Ratio), which is viewed as somewhat low for its current
rating lvel. A.M. Best continues to have concerns regarding the
company's high exposure to real estate linked assets, primarily from its
large commercial mortgage loan portfolio and real estate holdings as
well as its overall higher level of below investment grade bonds
relative to the industry. A.M. Best believes MetLife's future earnings
will be pressured as the low interest rate environment continues to
strain its interest sensitive product margins and further spread
compression. A.M. Best believes MetLife's significant block of variable
annuity business with embedded guarantees may lead to earnings
volatility as interest rates and equity markets change. However, A.M.
Best notes that MetLife has purposely curtailed new business growth in
this segment and introduced products with protected growth strategies to
mitigate this risk on new business.
The ratings for the property/casualty unit recognize its strong
capitalization, consistent trend of favorable operating performance,
successful multiple-channel distribution network and extensive market
Additional positive rating factors include the property/casualty unit's
geographic diversification and the marketing advantage it derives from
the established brand name recognition of MetLife. Furthermore, the
ratings acknowledge management's focused operating strategy, extensive
product knowledge and multiple distribution channels. The companies have
consistently generated capital through disciplined underwriting, solid
pre-tax operating income and strong total investment returns. The
ratings also recognize the financial strength and support provided by
Partially offsetting these positive rating factors are the
property/casualty unit's moderately elevated underwriting leverage, a
dividend policy that constrains its surplus growth and exposure to
severe weather-related events.
Positive rating actions could occur following a significant improvement
in operating performance or change in business profile that results in a
proportionally larger contribution by the property/casualty operation to
the overall earnings of MetLife. Negative rating actions could occur
following a sudden, unexpected and material decline in the company's
risk-adjusted capitalization, a sustained deterioration in its operating
performance or diminished liquidity measures.
Key rating drivers that may lead to positive rating actions on the
life/health subsidiaries include a consistent ability to outperform
peers, diminished risk profile and capital improvement at the operating
company. Key rating drivers that may lead to negative rating actions
include a sustained material deterioration in operating performance,
material impairments or realized losses in the investment portfolio or
diminished key capital, leverage, coverage and liquidity ratios.
For a complete list of MetLife, Inc. and its subsidiaries' FSRs, ICRs
and debt ratings, please www.ambest.com/press/112808metlife.pdf.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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