Jan 29 - Fitch Ratings has affirmed all existing ratings assigned to
MetLife, Inc. (MetLife) and its subsidiaries, including the 'AA-' Insurer
Financial Strength (IFS) ratings assigned to certain domestic life insurance
companies and 'A' Issuer Default Rating (IDR) assigned to MetLife. The Rating
Outlook is Stable. A full list of rating actions follows at the end of this
The affirmation of MetLife's ratings reflects Fitch's view that the company's
strong balance sheet fundamentals, excellent financial flexibility, and very
strong market positions in several major insurance products lines and markets in
the U.S. and select international markets are consistent with rating
expectations. Fitch believes that the company's large-scale, very strong brand
name, and large and diverse distribution capabilities provide significant
Fitch's primary rating concerns include MetLife's somewhat high financial
leverage, above-average exposure to the variable annuity business, and
macroeconomic challenges associated with the current low interest rate
Fitch believes that MetLife's acquisition of American Life Insurance Company
(ALICO) has significantly strengthened and diversified MetLife's international
operations, and increased the share and mix of earnings generated from
protection products and international markets. Fitch expects MetLife's earnings
from its international businesses to increase over time due to higher relative
growth rates and M&A focus. The integration of ALICO within MetLife's existing
international markets appears to be progressing as expected.
MetLife's strong balance sheet fundamentals reflect the company's strong
risk-adjusted capitalization, favorable liquidity profile, and good asset
quality. Fitch notes that the statutory capitalization of MetLife's U.S. and
Japanese insurance operations is considered strong and in line with rating
expectations. The company's domestic life insurance subsidiaries (excluding
ALICO) reported combined statutory total adjusted capital of over $28 billion at
Sept. 30, 2012 and combined statutory net income of approximately $2.7 billion
in the first months of 2012. Fitch estimates the combined risk-based capital
(RBC) of the domestic life insurance companies at 450% at Sept. 30, 2012.
MetLife's Japanese insurance subsidiary represents the company's largest
insurance business outside the U.S. Fitch expects the Japanese subsidiary to
report a statutory solvency margin ratio above 800% at year-end 2012, which is
above both rating expectations and levels achieved by most Japanese peers.
The company's financial leverage was 28% at Sept. 30, 2012, which is above
Fitch's rating expectations. Fitch expects financial leverage to decline
modestly 2013 due to growth in retained earnings and debt repayment.
MetLife's earnings performance and GAAP interest coverage have improved over the
past year but remain somewhat below rating expectations. Fitch expects that the
current low interest rate environment will limit MetLife's ability to grow
earnings but recognizes that the company has in place an extensive interest rate
hedging program that is expected to help mitigate the earnings impact over the
intermediate term. Fitch expects GAAP return on equity (ROE) to in the 10-11%
range in 2013 driven by increased earnings from International operations and
modest growth in U.S. Fitch expects MetLife's GAAP interest coverage ratio to
be approximately 6x-7x for full year 2012 on a normalized basis due to improved
earnings performance. Positively, Fitch estimates adjusted statutory interest
coverage to be approximately 3x, which is in line with rating expectations.
MetLife's equity market exposure is primarily attributable to its investment in
alternative investments and rapid growth in its variable annuity business.
Fitch notes that the company's variable annuity hedging program is robust and
did perform well during the 2008-2009 time period. However, the hedging of
variable annuity risk requires the company to make policyholder behavior
assumptions that may prove inaccurate. Deviations from pricing and hedging
assumptions could have a material negative impact on MetLife's capital and
earnings in a severe, albeit unexpected, scenario.
Key rating triggers that could result in an upgrade of MetLife's ratings include
an NAIC RBC ratio consistently above 475%, GAAP interest coverage ratio in the
8x-10x range, and the successful integration of ALICO.
Key rating triggers that could result in a downgrade of MetLife's ratings
include an NAIC RBC ratio below 350%, financial leverage ratio above 30%, and
GAAP interest coverage ratio below 5x.
Fitch affirms the following with a Stable Outlook:
--Long-term IDR at 'A';
--Short-term IDR at 'F1';
--floating-rate senior notes due August 2013 at 'A-';
--5% senior notes due November 2013 at 'A-';
--2.375% senior notes due February 2014 at 'A-';
--5.5% senior notes due June 2014 at 'A-';
--5% senior notes due 2015 at 'A-';
--6.75% senior notes due 2016 at 'A-';
--6.817% senior notes due 2018 at 'A-';
--7.717% senior notes due 2019 at 'A-';
--5.25% sterling senior notes due 2020 at 'A-';
--4.75% senior notes due 2021 at 'A-';
--5.375% senior notes due 2024 at 'A-';
--6.5% senior notes due 2032 at 'A-';
--5.875% senior notes due 2033 at 'A-';
--6.375% senior notes due 2034 at 'A-';
--5.7% senior notes due 2035 at 'A-';
--5.875% senior notes due 2041 at 'A-';
--4.125% senior notes due 2042 at 'A-';
--common equity units backed by senior notes at 'A-';
--6.4% junior subordinated debentures due December 2036 at 'BBB';
--10.75% junior subordinated debentures due August 2039 at 'BBB';
--Floating-rate preferred stock, series A at 'BBB';
--Fixed-rate preferred stock series B at 'BBB';
--Commercial paper at 'F1'.
MetLife Funding, Inc.
--Commercial paper at 'F1+'.
MetLife Capital Trust IV
--7.875% trust securities at 'BBB'.
MetLife Capital Trust X
--9.25% trust securities at 'BBB'.
Metropolitan Life Insurance Company
--IFS at 'AA-';
--IDR at 'A+';
--Surplus notes at 'A';
--Short-term IDR at 'F1+'.
MetLife Investors Insurance Company
MetLife Insurance Company of Connecticut
General American Life Insurance Company
MetLife Investors USA Insurance Company
New England Life Insurance Company
--IFS at 'AA-'.
Metropolitan Life Global Funding I
--Medium-term note program at 'AA-'.
MetLife Institutional Funding II
--Medium-term note program at 'AA-'.
MetLife Short Term Funding LLC
--Commercial paper program rated 'F1+'.