MOODY'S AFFIRMS METLIFE, INC.'S CREDIT RATINGS (SENIOR DEBT AT A2):CHANGES RATING OUTLOOK TO NEGATIVE
New York, January 31, 2005 -- Moody's Investors Service today affirmed the credit ratings of MetLife,
Inc. (MetLife - senior unsecured debt at A2) and its affiliates,
and changed the outlook on MetLife's ratings to negative from stable.
These actions follow MetLife's announcement that it has agreed to
purchase Travelers Life & Annuity (Travelers) and Citigroup's
international insurance businesses (except for the Mexican operations)
from Citigroup Inc. (Citigroup) for $11.5 billion.
The transaction, which is subject to domestic and international
regulatory approvals, is expected to close in the third quarter
Moody's said that it expects the transaction to be financed with
a combination of common stock, equity-like securities,
debt securities, cash on hand, and cash generated through
certain asset sales. Asset sales could include the sale of MetLife's
majority stake in Reinsurance Group of America, Inc. and
the sale of certain real estate investments. The change of the
outlook to negative is primarily driven by the rating agency's view
that the financing structure will be aggressive, with projected
financial leverage increasing to 29% until year-end 2006,
and reduced interest coverage and fixed charge coverage in the medium
The rating agency said that MetLife will gain a number of benefits from
this transaction, including an increase in size and scale of operations,
improved market positions in individual life and individual annuities,
expanded distribution opportunities, and increased scope in its
international operations. One of the key benefits of the transaction,
according to Moody's, is the ten year marketing agreement
with Citigroup which will give MetLife access to the Travelers'
existing distribution channels which include Smith Barney, Primerica
and Citibank branches globally. Moody's said that it also
expects the acquisition to add in excess of $850 million of after-tax
operating earnings on an annual basis and achieve annual cost savings
of at least $150 million.
Moody's indicated that it expects goodwill and other intangibles
on MetLife's balance sheet to significantly increase as a result
of this acquisition. In addition, the rating agency noted
that MetLife's risk profile will increase somewhat as a result of
the exposure to AXXX reserves associated with Travelers' universal
life business with secondary guarantees. In addition, MetLife's
exposure to institutional spread business will increase, although
Moody's said that it expected it to remain at a moderate level.
The increased international exposure and the challenges associated with
managing businesses in a number of countries where MetLife has no prior
experience will also present additional risks, according to the
The ability to generate capital internally, combined with MetLife's
plans for capital management, will continue to be a strong driver
in the company's rating profile, according to the rating agency.
Moody's stated that it expects MetLife's consolidated adjusted financial
leverage will increase to no more than 29% on a temporary basis,
and will decrease to less than 25% by year-end 2006.
No share repurchases are expected until financial leverage is reduced
to below 25%. The current rating, according to the
rating agency, also incorporates an expected NAIC Risk Based Capital
(RBC) ratio of at least 300% for Metropolitan Life Insurance Company
and its affiliates, including the newly acquired Travelers companies,
on a stand-alone basis, as well as on a consolidated basis.
Also incorporated into the rating is the expectation that MetLife will
hold a minimum of $500 million of cash at the holding company level.
Moody's expects MetLife to maintain interest only coverage,
and interest and common stock dividend coverage of at least 3.5
times and 2 times, respectively. Cash available in the coverage
ratio is defined as statutory dividends available without prior regulatory
approval, and excludes cash at the holding company.
The rating agency said that the rating could be downgraded if financial
leverage were not brought to below 25% by year-end 2006,
if NAIC Risk Based Capital (RBC) ratio fell below 300% for Metropolitan
Life Insurance Company and its affiliates, or if interest only cash
coverage and cash coverage of interest and common stock dividends fell
below 3.5 times and 2 times respectively.
Factors that could change the rating up, Moody's added, include
a reduction in financial leverage to less than 15%, interest
only cash coverage and cash coverage of interest expense and shareholder
dividends at the holding company of at least 7 and 4, times respectively,
and sustained return on assets of at least 100 bp.
The followings ratings have been affirmed with a negative outlook:
MetLife, Inc. - Senior unsecured debt at A2;
Subordinated debt at (P)A3; Preferred stock at (P)Baa1; commercial
paper rating at Prime-1
MetLife Capital Trust II -- Backed preferred shelf at (P)A3
MetLife Capital Trust III -- Backed preferred shelf at (P)A3
Metropolitan Life Insurance Company - Insurance financial strength
at Aa2; Surplus notes at A1;
MetLife Investors Insurance Company - Insurance financial strength
Metropolitan Life Global Funding I - Backed senior secured debt
and MTN at Aa2
GenAmerica Capital I - Preferred stock at A3
General American Life Insurance Co. - Insurance financial
strength at Aa2; Surplus notes at A1
New England Life Insurance Company - Insurance financial strength
New England Mutual Life Insurance Company - Surplus notes at A1;
Metropolitan Tower Life Insurance Company - Insurance financial
strength at Aa3
MetLife Investors USA Insurance Company - Insurance financial strength
Metropolitan P&C Insurance Company - Insurance financial strength
The following ratings have been affirmed with a stable outlook:
MetLife Funding, Inc. - Commercial paper at Prime-1
Metropolitan Life Insurance Company - Short-term insurance
financial strength at Prime-1
MetLife, Inc., headquartered in New York, reported
total assets of about $346 billion and shareholders' equity of
approximately $23 billion as of September 30, 2004.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to repay punctually senior policyholder claims
For more information, visit our website at www.moodys.com/insurance.
Financial Institutions Group
Moody's Investors Service
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service