Nov 20 - Fitch Ratings has affirmed all ratings for Massachusetts Mutual
Life Insurance Company (MassMutual), its wholly owned domestic insurance
subsidiaries, and affiliates. A complete list of ratings follows at the end of
this press release. The Rating Outlook is Stable.
This action follows a periodic review of MassMutual's financial results.
The ratings and Outlook are supported by MassMutual's large and stable block of
traditional life insurance, strong capital levels, strong competitive positions
in several major business lines, high-quality investment portfolio, and moderate
Key rating concerns include challenges related to macroeconomic factors and
competitive market conditions due to slow industry growth in the company's core
insurance products. Fitch expects macroeconomic challenges associated with the
European debt crisis, U.S. 'fiscal cliff', and weak economic recovery will
constrain MassMutual's earnings over the near-term and could lead to a material
adverse effect on capital and earnings in a severe, albeit unexpected, scenario.
Fitch considers MassMutual's capital strong with significant financial
flexibility to maintain capital levels due to the participating nature of
MassMutual's in-force whole life products. Consolidated statutory total adjusted
capital (TAC) increased approximately 9% in first nine months of 2012 from $13.2
billion at year-end 2011 to $14.4 billion at Sept. 30, 2012, driven by operating
earnings, improved investment quality, and a first quarter $400 million surplus
note issuance. This has also been a driving factor in the improvement in
operating leverage from 8.4 times (x) to 6.4x over the 2008 to Sept. 30, 2012
time period. MassMutual's consolidated NAIC risk-based capital ratio at Sept.
30, 2012 is estimated to be relatively flat compared year-end 2011's 522%.
Fitch views the quality of MassMutual's statutory capital has deteriorated
somewhat in recent years due to the addition of a significant amount of surplus
notes and the recognition of a portion of the "hidden value" of its asset
management subsidiaries due to a 2011 write-up in value associated with an
MassMutual's financial leverage ratio and total financing and commitment ratio
have increased in recent periods due to the surplus notes issuance, but are
still considered modest and are expected to remain so for the foreseeable
future. Surplus notes comprised 12.1% of TAC at Sept. 30, 2012, which is within
rating guidelines of 15% for normal surplus note notching.
MassMutual's liquidity is enhanced by the absence of any meaningful long-term
financial debt maturities before 2023, the low level of outstanding commercial
paper borrowings of approximately $250 million, and the company's strong
asset/liability management program associated with its moderately active funding
MassMutual's current earnings are lower than Fitch's ratings guidelines and
those of stock peers. However, Fitch believes earnings are reasonable given
MassMutual's business mix, which includes a high percentage of participating
The ratings on C.M. Life Insurance Company (CM Life) and MML Bay State Life
Insurance Company (MML Bay State), which are wholly owned subsidiaries of
MassMutual, are based on Fitch's view that these entities are important
operating companies within the MassMutual organization.
MassMutual Global Funding, LLC is a limited liability company domiciled in the
Cayman Islands. MassMutual Global Funding II is a statutory trust domiciled in
the state of Delaware. The companies and trusts were established for the sole
purpose of issuing debt instruments secured by funding agreements issued by
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life
Insurance Company and its affiliates. MassMutual is headquartered in
Springfield, MA. Its affiliates include OppenheimerFunds, Inc.; Babson Capital
Management LLC and its wholly owned subsidiary Cornerstone Real Estate Advisers
LLC; Baring Asset Management Limited; MML Investors Services, LLC., MassMutual
International LLC and The MassMutual Trust Company, FSB. The company had $490
billion in assets under management as of Sept. 30, 2012.
Key rating triggers that could lead to an upgrade include:
--Sustained improvement in quality and stability of operating results,
investment performance and capital generation.
Key rating triggers that could lead to a downgrade include:
--Increased volatility in capital and earnings due to higher than expected
credit-related losses (particularly in commercial real-estate related
investments), adverse outcome to litigation or other unexpected developments.
--NAIC risk-based capital ratio below 400%.
--Surplus notes to TAC ratio above 15%.
--A change in MassMutual's legal organizational structure (which Fitch considers
unlikely) or a significant change in the macro environment.
Fitch affirmed the following ratings with a Stable Outlook:
Massachusetts Mutual Life Insurance Company
--Insurer Financial Strength (IFS) at 'AA+';
--Issuer Default Rating (IDR) at 'AA';
--$250 million 7.625% surplus notes due Nov. 15, 2023 at 'AA-';
--$100 million 7.5% surplus notes due March 1, 2024 at 'AA-';
--$250 million 5.625% surplus notes due May 15, 2033 at 'AA-';
--$750 million 8.875% surplus notes due June 1, 2039 at 'AA-';
--$400 million 5.375% surplus notes due Dec. 1, 2041 at 'AA-';
--Short-term IDR at 'F1+';
--Commercial paper program at 'F1+'.
C.M. Life Insurance Company
MML Bay State Life Insurance Company
--IFS at 'AA+'.
MassMutual Global Funding, LLC
MassMutual Global Funding II
--Secured notes program at 'AA+'.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Oct. 18, 2012).
Applicable Criteria and Related Research:
Insurance Rating Methodology - Amended