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.