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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JULY 01, 2005 12:00 AM (EDT)
As a result of today's closing of the acquisition of Citigroup's Travelers Life & Annuity (TL&A) and substantially all of Citigroup's international insurance business by MetLife, Inc. (MetLife) [NYSE: MET] (New York, NY), A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Metropolitan Life Insurance Company (MLIC), the lead operating company of MetLife, Inc., and its key life/health affiliates, including the newly acquired Travelers Insurance Company (TIC) and Travelers Life and Annuity Company (TLAC). The rating has a stable outlook.
Concurrently, A.M. Best has affirmed and removed from under review the issuer credit rating (ICR) of "aa" of MLIC and the existing debt ratings of MetLife. The ICRs of "aa" of TIC and TLAC, as well as the rating of "aa" of the two funding agreement-backed securities (FABS) programs established by TIC, have also been affirmed. These ratings have a negative outlook.
Lastly, A.M. Best has assigned a rating of "aa" with a negative outlook to the FABS program established by MLIC and debt ratings of "aa" to the outstanding notes issued under MLIC's global medium-term note (GMTN) program. (See link below for a complete list of the ratings.)
The negative outlook reflects A.M. Best's view that challenges remain with respect to MetLife effectively rebranding TL&A's products, preserving existing and cultivating new distribution relationships, efficiently integrating inforce business without compromising service, as well as maintaining appropriate risk-adjusted capitalization levels for its current ratings. Additionally, A.M. Best notes the significant amount of goodwill and intangibles and the diminished level of tangible capital available to MetLife as a result of this acquisition. A.M. Best believes there is significant execution risk inherent in integrating the operations of the two organizations, which could impact the timing of the realization of expected cost savings given the breadth and complexity of the transaction. A.M. Best notes, however, that the projected cost savings are not purely headcount related, and that detailed integration plans are in place and are being actively managed.
The acquisition solidifies MetLife as the largest individual life insurer in the United States - based on sales and admitted assets - and expands its presence in the retirement and savings and international markets. A.M. Best expects TL&A to augment MetLife's earnings power via increased scale, enhanced market positions in its core life and retirement savings businesses and expanded distribution through agreements designating MetLife as a preferred product provider for several of Citigroup's retail channels. A.M. Best also anticipates the group will maintain solid risk-adjusted capitalization of its operating subsidiaries and strong cash flow and interest coverage at the holding company. MetLife's financial leverage as of June 30, 2005 is roughly 30% - giving some equity credit for hybrid securities. A.M. Best expects this level to moderate back to management's 25% target by year-end 2006 or early 2007.
Through its $12 billion GMTN program initially established in 2002, Metropolitan Life Global Funding I, a Delaware statutory trust, may issue various series of notes to certain institutional investors on a private placement basis. Each series of notes is secured by one or more funding agreements issued by MLIC, which is domiciled under the laws of the state of New York. Based on A.M. Best's analysis of the FABS structure utilized by MetLife, the program and notes will carry MLIC's ICR of "aa." This reflects that each series of notes is secured by a first priority security interest in the underlying funding agreements, which are unsecured obligations of MLIC's general account. In addition, according to New York Insurance Law, in the event of MLIC's insolvency, the claims under each funding agreement would be accorded a priority in liquidation equal to that of MLIC's policyholders (i.e., pari passu). Therefore, in assigning the above ICR, A.M. Best believes that all investors in the GMTN program are exposed to the inherent credit, liquidity and business risks of the sponsoring insurance company, MLIC.
For a comprehensive list of MetLife Inc.'s financial strength, debt and issuer credit ratings, please visit MetLife.
For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.