A.m. best revises outlook to stable for metlife, inc. and its
subsidiaries
Oldwick, n.j.--(business wire)--a.m. best co. has revised the outlook to stable from negative and 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 revised the outlook to stable from negative and affirmed the icr of “a-” and existing debt ratings of metlife. (see link below for a detailed listing of the companies and ratings.) these ratings reflect metlife’s diverse business mix, prominent market position and brand recognition in several business lines, favorable operating results and significant operating scale. these strengths are enhanced by the significant financial flexibility, diverse sources of revenue and earnings and the expanding global market footprint of metlife, which is highlighted by the november 2010 acquisition of the american life insurance company (alico). through its diversified distribution channels, metlife maintains the scale and distribution capabilities necessary to be an industry leader in its various product lines. metlife has demonstrated a track record of market share gains and solid top line growth in its core business lines. the revised outlook reflects a.m. best’s belief that metlife’s integration of the alico organization has been effective to date, reflected in targeted rebranding efforts and growing sales. alico provides metlife with meaningful new sources of diversified earnings as this acquisition greatly has enhanced metlife’s global life insurance presence, specifically in the japanese market. a.m. best notes that metlife’s financial leverage and interest coverage ratios have improved, with additional debt reduction expected as certain maturing debt will not be refinanced. 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 low 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 and real estate holdings. a.m. best believes metlife’s future earnings will be pressured as the low interest rate environment continues with additional strain on the company’s interest sensitive product margins result in further spread compression. recently, metlife’s exposure to asset accumulation products with embedded guarantees has grown significantly, which subjects the company to increased exposure to equity market volatility. recently, metlife introduced products with protected growth strategies to mitigate this risk. additionally, a.m. best has affirmed the fsr of a (excellent) and icr of “a+” of metlife auto & home and its eight fully reinsured subsidiaries, led by metropolitan property and casualty insurance company (both domiciled in warwick, ri). the outlook for the fsr is stable, while the outlook for the icr has been revised to stable from negative. this revised icr outlook reflects the improved outlook of metlife. the ratings of metlife auto & home recognize its strong capitalization, consistent trend of favorable operating performance, successful multiple-channel distribution network and extensive market expertise. additional positive rating factors include metlife auto & home’s geographic diversification and the marketing advantage it derives from the established brand name recognition of metlife. in addition, the ratings acknowledge management’s focused operating strategy, extensive product knowledge and multiple distribution channels. the group consistently generates capital through disciplined underwriting, solid pre-tax operating income and strong total investment returns. partially offsetting these positive rating factors are metlife auto & home’s moderately elevated underwriting leverage, a dividend policy that constrains surplus growth and as demonstrated over the past several years, an exposure to severe weather related events. key rating drivers that may lead to positive rating actions on metlife subsidiaries’ ratings include a consistent ability to outperform peers, diminished risk profile and improvements in key leverage and earnings metrics. 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, a significant write-down of goodwill and intangibles or diminished key capital, leverage, coverage and liquidity ratios. the potential for future acquisitions and the associated integration risks and company profile revisions could lead to both positive and negative pressure on the organization’s ratings, depending on the acquisition details. for a complete list of metlife, inc. and its subsidiaries’ fsrs, icrs and debt ratings, please see www.ambest.com/press/111701metlife.pdf. the principal methodology used in determining these ratings is best’s credit rating methodology -- global life and non-life insurance edition, which provides a comprehensive explanation of a.m. best’s rating process and highlights the different rating criteria employed. additional key criteria utilized include: “risk management and the rating process for insurance companies”; “bcar for life/health insurers”; “rating members of insurance groups”; “a.m. best’s perspective on operating leverage”; “a.m. best ratings & the treatment of debt”; “equity credit for hybrid securities”; “understanding bcar for property/casualty insurers”; and “catastrophe analysis in a.m. best ratings.” methodologies can be found at www.ambest.com/ratings/methodology. founded in 1899, 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 © 2011 by a.m. best company, inc. all rights reserved.
