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.