MOODY'S AFFIRMS RATINGS OF METLIFE, INC. (SENIOR DEBT A2) AND ITS AFFILIATES; CHANGES RATING OUTLOOK TO STABLE
Approximately $12.4 billion of debt securities affected
New York, April 27, 2004 -- Moody's Investors Service has affirmed the ratings of MetLife, Inc.
(MetLife), (senior debt of A2) and Metropolitan Life Insurance Company
(MLIC - insurance financial strength rating of Aa2) and the group's
other rated affiliates. At the same time, the rating agency
changed the outlook for the group's ratings to stable from negative.
Commenting on the change in outlook for MetLife's ratings, Moody's
said the original issues that gave rise to the negative outlook were reduced
statutory capital and lowered risk adjusted capital at the company's primary
operating subsidiary, MLIC, credit losses, and to a
lesser degree, the balance sheet and earnings impact of down equity
markets. The rating agency said that improved credit and equity
markets, as well as ongoing expense reductions have helped to improve
MetLife's earnings profile and capital adequacy. The statutory
capital position and the NAIC risk-based capital (RBC) ratio have
improved over the last year and a half, with year end 2003 statutory
capital of $11.8 billion and RBC of 304% for MLIC.
Moody's commented that it recognized the company's active steps to improve
MLIC's statutory capital position, and that statutory capital and
the RBC have also increased as a result of strong statutory operating
income, reduced realized capital losses, and realized gains
from real estate disposals. Although Moody's expects some
additional loss content to work through the investment portfolio,
the rating agency commented that the healthier credit markets have helped
MetLife to significantly reduce it exposure to impaired assets.
The ability to generate capital internally, combined with the company's
plans for capital management, will continue to be a strong driver
in the company's rating profile, according to the agency.
Moody's stated that it expects MetLife's consolidated adjusted financial
leverage (adjusted debt / total adjusted GAAP capital -- 23.5%
as of December 31, 2003) to remain at or below 25%.
The rating also incorporates an expected RBC for MLIC and for the consolidated
life insurance operations of at least 300%, as well as GAAP
and statutory net income of at least $2 billion in 2004 and 2005.
Other assumptions embedded in the rating include an absence of significant
one time charges and adequate asbestos litigation related reserves.
The rating agency also said that it expects strong cash flow from subsidiaries
to MetLife to cover holding company expenses, and that MetLife will
maintain an adequate amount of liquidity at the holding company on an
Factors that could positively influence the rating, Moody's added,
include a reduction in financial leverage to no less than 15%,
a sustained RBC level of at least 400%, cash coverage of
interest expense and shareholder dividends of the holding company of at
least five times, return on assets of at least 100 bp, as
well as in-market acquisitions that achieve significant cost savings
and franchise improvement.
The rating agency said that the negative rating pressure could develop
if financial leverage rose above 30%, if RBC declined below300%,
if the company experienced significant impairments in its credit portfolio,
or if the company made acquisitions that raised its risk profile.
Moody's said that MetLife's ratings are based on the company's strong
brand recognition, its leading market positions in individual and
group insurance businesses, a large career agent sales force,
as well as its diversified earnings and business mix, and improving
profitability. According to Moody's, the insurance
operations also benefit from the stable profitability of the closed block.
Offsetting these strengths somewhat, the rating agency added,
are the slow industry growth outlook for individual life products,
growing exposure to institutional spread business, moderate financial
leverage, MetLife's shift of business toward lower-margined
products, the potential for additional credit losses, and
continued exposure to commercial real estate. In addition,
the rating agency noted that since demutualization in 2000, management's
focus on shareholder returns has somewhat increased the company's risk
The followings ratings have been affirmed with a change in outlook to
stable from negative:
MetLife, Inc. - Senior debt at A2; Subordinated
debt at (P)A3; Preferred stock at (P)Baa1; commercial paper
rating at Prime-1
MetLife Capital Trust II - Preferred stock at (P)A3
MetLife Capital Trust III - Preferred stock at (P)A3
Metropolitan Life Insurance Company - Insurance financial strength
at Aa2; Surplus notes at A1; Short-term insurance financial
strength at Prime-1
MetLife Investors Insurance Company - Insurance financial strength
Metropolitan Life Global Funding I - Backed senior secured debt
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
STARTS Series 2001-4 - Backed senior secured debt at Aa2
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 Insurance & Annuity Company - Insurance financial
strength at Aa3
MetLife Investors USA Insurance Company - Insurance financial strength
Reinsurance Group of America, Inc. - Senior debt at
Baa1; Subordinated debt at (P)Baa2; Preferred stock at (P)Baa3
RGA Capital Trust I, II, III, and IV - Preferred
stock at (P)Baa2
RGA Reinsurance Company - Insurance financial strength at A1
MetLife, Inc., headquartered in New York, reported
total assets of about $327 billion and shareholders' equity of
approximately $21 billion as of December 31, 2003.
Metropolitan Life Insurance Company, domiciled in New York,
reported statutory assets of $229 billion and total adjusted capital
of approximately $11.8 billion as of December 31,
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.
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Financial Institutions Group
Moody's Investors Service