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 debt ratings of MetLife. Additionally, A.M. Best
has assigned debt ratings to the recently filed shelf registration. 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,
prominent market position and global brand recognition in several
business lines, favorable operating results and significant operating
scale. MetLife continues to report solid operating earnings while
maintaining adequate risk-adjusted capital. Despite net derivative
losses for the first nine months of 2013, mainly driven by increases in
interest rates and changes in foreign currencies, earnings remain strong
due to recent de-risking strategies and increased earnings share from
international markets. A.M. Best will continue to monitor the impact of
the current macroeconomic environment including interest rate movements
on MetLife’s insurance operation’s earnings and risk-adjusted capital.
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 the
organization’s expanded international presence. In addition, MetLife’s
ratings reflect continued improvement in its financial leverage and
interest coverage ratios. MetLife maintains a very strong liquidity
position at the holding company level, despite recent international
acquisitions, including AFP Provida S.A., a leading Chilean pension fund
administrator. Additionally, with MetLife taking full advantage of the
current low interest rate environment, it has recently issued senior
debt securities at very favorable rates, and it expects to use the
proceeds for general corporate purposes, which may include the repayment
of outstanding senior debt maturing in 2014.
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 lean for its
current rating level. 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, direct real estate holdings
and its overall high level of below investment grade bonds. 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, while significant legacy blocks of variable annuity business
with embedded guarantees may lead to earnings volatility. However, A.M.
Best notes that MetLife has purposely curtailed new business growth in
this segment and introduced index annuities offering limited downside
protection to reduce the overall risk exposure of the variable annuity
business.
The ratings for the property/casualty unit recognize its strong
capitalization, level of operating performance that exceeds the
composite, multiple-channel distribution network that includes MetLife’s
products and programs, and extensive market expertise.
Additional positive rating factors include the property/casualty unit’s
national geographic diversification and the marketing advantage it
derives from the established brand name recognition of MetLife. The
ratings further acknowledge management’s focused operating strategy that
allows the group to consistently generate capital from operating
earnings through disciplined underwriting and strong investment returns.
The ratings also recognize the financial strength and support provided
by MetLife.
Partially offsetting these positive rating factors are the
property/casualty unit’s moderately elevated underwriting leverage, its
exposure to severe weather-related events and a dividend policy that
constrains surplus growth.
Positive rating actions could occur if the property/casualty unit has a
significant improvement in operating performance or change in business
profile, which results in a proportionally larger contribution to the
overall earnings of MetLife. Negative rating actions could occur if
there is a sudden, unexpected and material decline in the organization’s
risk-adjusted capitalization, a sustained deterioration in its operating
performance or diminished liquidity measures.
A.M. Best believes that MetLife and its life/health subsidiaries remain
well positioned at their current rating levels. 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 listing of MetLife, Inc. and its subsidiaries’ FSRs, ICRs
and debt ratings, please visit www.ambest.com/press/112103metlife.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.
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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS
RESERVED.
Copyright Business Wire 2013