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FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 04, 2014 05:21 PM (EST)
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the 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 affirmed the FSRs of A (Excellent) and ICRs of "a+" of MetLife's property/casualty companies, consisting of Metropolitan Property and Casualty Insurance Company, seven fully reinsured subsidiaries and a separately rated subsidiary, Metropolitan Group Property and Casualty Insurance Company (together referred to as MetLife Auto & Home). 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, favorable operating results, strong franchise, considerable scale and prominent market positions across several product lines. MetLife continues to generate consistent revenue and cash flows, reporting growth in operating earnings across all segments. Through its diversified distribution channels, MetLife possesses the scale and breadth that is crucial for sustaining leading positions in its various businesses. A.M. Best views favorably the organization's strategy to improve profitability by expanding its presence in emerging markets and divesting underperforming business while reducing its risk profile by ceasing sales of universal life with secondary guarantees and controlling sales of variable annuities despite rising equity markets. A.M. Best notes the organization's strong, global risk management capabilities, which incorporate extensive use of sensitivity analysis and hedging activities to reduce economic risk related to volatility in equity markets, foreign currencies and interest rates.
Additionally, A.M. Best views favorably MetLife's recent improvement in its financial leverage and interest coverage ratios, as well as its robust liquidity position at the holding company. Management's disciplined approach to evaluating acquisition targets positioned MetLife to obtain leadership positions internationally through its purchases of Alico in 2010 and ProVida in 2013. Moreover, MetLife's strong franchise and sizable expense reduction initiatives should facilitate its strategy to accelerate growth in the employee benefits arena domestically and internationally.
Partially offsetting these positive rating factors is MetLife's elevated exposure to high-risk assets, significant operating leverage and its adequate risk-adjusted capital position (as measured by Best's Capital Adequacy Ratio), which is lower than many similarly rated life insurers. Relative to industry norms, MetLife maintains a high exposure to real estate-linked assets, consisting mainly of its large commercial mortgage loan portfolio, direct real estate holdings and a significant allocation to below investment grade bonds. A.M. Best notes, however, that MetLife has not materially added investment risk to its balance sheet to enhance yield in the low interest rate environment. A.M. Best believes MetLife's future earnings could be impacted as low rates pressure interest-sensitive product margins, while substantial legacy blocks of variable annuity business with embedded guarantees may cause some earnings volatility. Finally, consistent with industry peers, MetLife utilizes operating leverage to fund "redundant" reserves and to supplement earnings. A.M. Best believes MetLife's appetite for these activities remains elevated and impacts the overall quality of capital at its operating subsidiaries.
A.M. Best believes that a positive rating action for MetLife and its core life/health subsidiaries is unlikely in the near to medium term. Factors that may lead to a negative rating action include a significant deterioration in operating performance, material investment impairments, increased exposure to high-risk assets or diminished key capital, leverage, coverage and liquidity ratios.
The ratings for MetLife Auto & Home recognize the companies' 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 companies' national geographic diversification and the marketing advantage they derive from MetLife's established brand name recognition. 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. Finally, the ratings recognize the financial strength and support provided by MetLife.
Partially offsetting these positive rating factors are MetLife Auto & Home's moderately elevated underwriting leverage, its exposure to severe weather-related events and a dividend policy that constrains surplus growth.
For MetLife Auto & Home, a positive rating action could occur if the group experiences significant improvement in operating performance or business profile, resulting in a proportionally larger contribution to the overall earnings of MetLife. A negative rating action could occur if there is a material decline in the unit's risk-adjusted capitalization, a sustained deterioration in operating performance or diminished liquidity measures.
For a complete listing of MetLife, Inc. and its subsidiaries' FSRs, ICRs and debt ratings, please visit MetLife, Inc.
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.
Key insurance criteria reports utilized:
This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.