A.M. Best Removes From Under Review & Affirms Credit Ratings of MetLife Inc. & Its Subsidiaries; Downgrades Credit Ratings of...
October 07 2016 - 4:45PM
Business Wire
A.M. Best has removed from under review with developing
implications and affirmed the Financial Strength Rating (FSR) of A+
(Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR)
of “aa-” of the Metropolitan Life Insurance Company (MLIC)
(New York, NY), General American Life Insurance Company (St.
Louis, MO) and Metropolitan Tower Life Insurance Company
(Wilmington, DE) (collectively called RemainCo). Additionally, the
Long-Term ICR of “a-” of MetLife, Inc. (MetLife)
(headquartered in New York, NY) [NYSE: MET] and its existing
Long-Term Issue Credit Ratings have been removed from under review
and affirmed.
Concurrently, A.M. Best has removed from under review with
developing implications and downgraded the FSR to A (Excellent)
from A+ (Superior) and the Long-Term ICR to “a+” from “aa-” of
MetLife Insurance Company USA (Wilmington, DE), New
England Life Insurance Company (Boston, MA) and First
MetLife Investors Insurance Company (New York, NY). These
entities (collectively referred to as Brighthouse) will be held
under Brighthouse Financial, Inc., a newly formed holding
company.
A.M. Best also has removed from under review with developing
implications and affirmed the FSR of A (Excellent) and the
Long-Term ICRs of “a+” of MetLife’s property/casualty companies,
consisting of Metropolitan Property and Casualty Insurance
Company, and seven fully reinsured subsidiaries, as well as a
separately rated subsidiary, Metropolitan Group Property and
Casualty Insurance Company (both domiciled in Warwick, RI)
(together referred to as MetLife Auto & Home).
The outlook assigned to these Credit Ratings (ratings) is
stable. (See link below for a detailed listing of the companies and
ratings.)
The ratings of MetLife and its subsidiaries were placed under
review with developing implications in January 2016 after the
company announced its intent to separate a substantial portion of
its U.S. retail segment via an initial public offering, spin-off or
sale. On Oct. 5, 2016, Brighthouse Financial Inc. (Brighthouse)
filed a registration statement on Form 10 with the Securities and
Exchange Commission describing its planned separation from MetLife.
Brighthouse’s operating earnings represents approximately 20% of
MetLife’s total operating earnings and 50% of its retail segment’s
operating earnings.
The rating downgrades of Brighthouse reflect its less
creditworthy liability profile and the fact that it will no longer
benefit from the strength and support of MetLife, as well as its
related diversified businesses. A.M. Best notes that the business
that resides within Brighthouse is more capital intensive and
includes variable annuities with living benefit riders and
universal life with secondary guarantees, which increases the
group’s exposure to market volatility and interest rate risk.
A.M. Best notes the significant reserve charge taken in the
second quarter of 2016 due to revisions to policyholder behavior
assumptions on its variable annuity line of business and believes
that similar charges may occur in the future. Execution risk with
the separation will be an ongoing concern over the next few years,
including branding acceptance and MetLife’s ability to complete the
ultimate separation as planned. However, A.M. Best acknowledges the
experience and strong capabilities of the Brighthouse management
team, which has managed MetLife’s retail segment for the past
several years. In addition, A.M. Best expects the entities to
remain well-capitalized with strong risk-management
capabilities.
The rating affirmations of RemainCo reflect its industry leading
position in the group insurance markets and international presence
in which it holds several market leading positions in mature and
emerging markets. A.M. Best believes that RemainCo will benefit
from more streamlined operations, the ability to focus more
intently on its existing businesses and its reduced exposure to
higher risk insurance products. However, A.M. Best does note that
the company maintains an elevated level of risk within its
investment portfolio, including commercial-mortgage loans and
alternative investments, which remains above industry averages. In
addition, the company continues to face a challenging economic and
market environment within its existing business lines, including
increased volatility in certain emerging and international markets
in which MetLife operates.
While MetLife maintains adequate financial leverage at
approximately 25% and favorable interest coverage ratios, its
operating leverage remains relatively high compared to similarly
rated peers. In addition, A.M. Best expects MetLife’s financial
leverage will increase as a result of the spin-off, but will remain
within A.M. Best’s guidelines for its current rating.
For a complete listing of MetLife’s FSRs, Long-Term ICRs and
Long- and Short-Term Issue Credit Ratings, please visit MetLife
Inc.
This press release relates to Credit Ratings that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source.
For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20161007005800/en/
A.M. BestMichael Adams, FLMI, +1 908-439-2200, ext.
5133Senior Financial
Analyst—L/Hmichael.adams@ambest.comorChristopher Sharkey, +1
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJonathan Harris,
CFA, FRM, +1 908-439-2200, ext. 5771Senior Financial
Analyst—P/Cjonathan.harris@ambest.comorJim Peavy, +1
908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.comorJoseph Zazzera, MBA, +1
908-439-2200, ext.
5797Director—L/Hjoseph.zazzera@ambest.com
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