MOODY'S CONFIRMS METROPOLITAN LIFE'S Aa2 INSURANCE FINANCIAL STRENGTH RATING, DOWNGRADES DEBT RATINGS OF METLIFE, INC. (SENIOR DEBT to A2 FROM A1), FOLLOWING ANNOUNCEMENT OF HIDALGO ACQUISITION
New York, May 28, 2002 -- Moody's Investors Service has confirmed the Aa2 insurance financial strength
rating of Metropolitan Life Insurance Company. This rating action
follows MetLife Inc.'s (ML Inc.) announcement that it will
acquire Aseguradora Hidalgo, S. A. (Hidalgo),
the largest life insurer in Mexico for approximately $965 million.
The transaction, which is expected to close in the second quarter
of 2002, is subject to regulatory approvals. At the same
time, the rating agency downgraded the credit ratings of MetLife,
Inc. (senior debt to A2 from A1). The outlook for all MetLife
ratings is stable.
Hidalgo is a major provider of group life insurance which has historically
focused on the government marketplace. It also writes individual
life insurance which it sells primarily through payroll deduction.
Moody's noted that the current mix of Hidalgo's insurance products plays
to ML Inc.'s core competencies in individual life, group
products, worksite marketing, and that MetLife's product development
capabilities can be utilized to update, expand, and improve
on Hidalgo's product mix. The rating agency added that Mexico is
a fast growing market for life insurance and that ML Inc. has had
insurance operations in Mexico for over ten years and is familiar with
Moody's also commented that ML Inc. faces a number of challenges
with the acquisition of Hidalgo including the eventual loss of some preferred
marketing arrangements that the Mexican company currently enjoys because
of its government ownership. According to the rating agency,
ML Inc. will face execution risks in introducing new products and
efficiencies to the company. In addition, Moody's said that
it viewed negatively the sizable amount of goodwill and intangibles that
would be added to ML Inc.'s balance sheet.
Moody's added that the confirmation of the Metropolitan Life Insurance
Company's ratings reflected the rating agency's expectation that the transaction
will be financed with available cash from ML Inc., that the
company will upstream approximately $200 million of excess capital
from Hidalgo, and that ML Inc.'s financial leverage will
remain below 25%.
Moody's said that the downgrade of ML Inc.'s securities was driven
primarily by the rating agency's opinion that the rating differential
between the insurance financial strength ratings of operating insurance
companies and the debt ratings of holding companies should be widened
to better reflect the considerable differences in expected losses of obligations
of the two different types of entities. The rating agency noted
that the ML Inc. ratings previously carried a negative outlook
which reflected this viewpoint.
The following ratings were downgraded with a stable outlook:
MetLife, Inc.Senior debt to A2 from A1
Subordinated debt to (P)A3 from (P)A2
Preferred stock to (P)Baa1 from (P)A3
MetLife Capital Trust IPreferred stock to A3 from A2
MetLife Capital Trust IIPreferred stock to (P)A3 from (P)A2
MetLife Capital Trust IIIPreferred stock to (P)A3 from (P)A2
The following ratings were confirmed with a stable outlook:
Metropolitan Life Insurance CompanyInsurance financial strength of Aa2
; Surplus notes of A1.
MetLife, Inc.Commercial paper of Prime-1.
MetLife Funding Inc.Commercial paper of Prime-1.
GenAmerica Capital IPreferred stock of A3.
General American Life Insurance Co. Insurance financial strength
of Aa2; Surplus notes of A1
Metropolitan Insurance & Annuity CompanyInsurance financial strength
MetLife Investors USA Insurance CompanyInsurance financial strength of
MetLife Investors Insurance CompanyInsurance financial strength of Aa2.
New England Life Insurance CompanyInsurance financial strength of Aa2.
New England Mutual Life InsuranceSurplus notes of A1.
Reinsurance Group of America, Inc.Senior debt of A3.
Subordinated debt of (P)Baa1.
Preferred stock of (P)Baa2.
RGA Capital Trust IPreferred stock of (P)Baa1.
RGA Capital Trust IIPreferred stock of (P)Baa1.
STARTS Series 2001-3Senior Debt of Aa2
STARTS Series 2001-4Senior Debt of Aa2
The following rating was confirmed with a negative outlook:
Metropolitan Property & Casualty Ins. Co.Insurance financial
strength of Aa3.
The following rating was confirmed with a positive outlook:
RGA Reinsurance Company Insurance financial strength of A1.
MetLife, Inc., headquartered in New York, reported
total assets of about $259 billion and shareholders' equity of
approximately $15 billion as of March 31, 2002.
Visit our website at www.moodys.com/insurance.
Life Insurance Group
Moody's Investors Service
Ann G. Perry
VP - Senior Credit Officer
Life Insurance Group
Moody's Investors Service