Best’s News & Research Service - May 02, 2019 02:48 PM (EDT)
AM Best Affirms Credit Ratings of Massachusetts Mutual Life Insurance Company and Its Subsidiaries
- May 02, 2019 02:48 PM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings of “aa+” of Massachusetts Mutual Life Insurance Company (MassMutual) and its life/health subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company (both domiciled in Enfield, CT). Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “aa-” on the existing surplus notes of MassMutual and the “aa+” on notes issued under funding agreement-backed securities programs of MassMutual Global Funding, LLC and MassMutual Global Funding II. The outlook of these Credit Ratings (rating) is stable. The aforementioned companies are headquartered in Springfield, MA. (See below for a detailed listing of the Long-Term IRs and Short-Term Issue Credit Rating [Short-Term IR].)
The ratings reflect MassMutual’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and very strong enterprise risk management.
Risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio, is assessed as very strong and supports its growth, business and insurance risks. MassMutual’s invested asset portfolio is well-diversified and generally of good credit quality, but has elevated allocations in Schedule BA assets and below investment grade bonds. Liquidity capabilities are strong, supported by robust cash inflows and frequent monitoring, evaluation and testing of short and long-term cash needs. Mass Mutual’s quality of capital and reserve strength are viewed positively with significant levels of xxx reserve redundancies retained on its balance sheet, and an increased focus on whole life products. MassMutual’s operating performance benefits from diverse earnings with a good balance between insurance, asset management and investment margins. While earnings will be less diversified with the pending sale of OppenheimerFunds, the group should benefit from favorable organic earnings growth in the longer term, particularly in its ordinary life line of business, which has shown strong compound annual growth rates.
In the life insurance and asset management marketplace, MassMutual is one of the largest and most recognizable life insurers in the United States, with leading market positions in total life sales, ordinary life, disability income, annuities and bank-owned life insurance. Distribution has been augmented by the integration of the MetLife agent network purchased in 2016. Despite the narrowing of the business profile with the proposed OppenheimerFunds sale, MassMutual will continue to have strong institutional asset management capabilities through Barings, a wholly owned asset management affiliate.
In recent years, MassMutual sought to minimize its direct exposure to businesses, which have become less relevant to its long-term strategy. Its direct interest in MassMutual Japan was sold in the second quarter, 2018 to Nippon Life. Also, MassMutual Asia, its Hong Kong subsidiary, was sold in November, 2018 to Yunfeng Financial Group and several Asia-based investors. Mass Mutual continues to retain a minority interest in both companies.
In October, 2018, MassMutual announced it had entered into an agreement to sell OppenheimerFunds, its retail asset management affiliate, to Invesco in which it will replace operational control of OppenheimerFunds with an equity interest of $4.0 billion in preferred stock and approximately $1.7 billion in common stock with attractive coupons in a tax free exchange. Mass Mutual will own approximately 16% of Invesco’s common equity and the transaction is expected to close in the second quarter.
The following Short-Term IR has been affirmed:
Massachusetts Mutual Life Insurance Company—
— AMB-1+ on commercial paper program
The following Long-Term IRs have been affirmed with a stable outlook:
Massachusetts Mutual Life Insurance Company—
— “aa-” on $250 million 7.625% surplus notes, due 2023
— “aa-” on $100 million 7.500% surplus notes, due 2024
— “aa-” on $250 million 5.625% surplus notes, due 2033
— “aa-” on $750 million 8.875% surplus notes, due 2039 (of which $310 million remains outstanding)
— “aa-” on $400 million 5.375% surplus notes, due 2041
— “aa-” on $500 million 4.5% surplus notes, due 2065
— “aa-” on $475 million 4.9% surplus notes, due 2077
MassMutual Global Funding, LLC—“aa+” program rating
— “aa+” on all outstanding notes issued under the program
MassMutual Global Funding II—“aa+” program rating
— “aa+” on all outstanding notes issued under the program
The following Long-Term IRs have been assigned with a stable outlook:
MassMutual Global Funding II
— “aa+” on $650 million 3.40% senior secured medium term notes, due 2026
— “aa+” on $200 million 2.73% senior secured medium term notes, due 2021
This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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