MOODY'S CONFIRMS RATINGS OF METROPOLITAN LIFE INSURANCE COMPANY (INSURANCE FINANCIAL STRENGTH AT Aa2), UPGRADES THE RATINGS OF GENERAL AMERICAN LIFE INSURANCE COMPANY (INSURANCE FINANCIAL STRENGTH TO Aa2)
Moody's Investors Service has confirmed the credit ratings of Metropolitan Life Insurance Company (MetLife) (insurance financial strength at Aa2). Moody's rating action concludes a review that began on August 26, 1999 when MetLife was placed on review following the company's announcement that it had signed a definitive agreement to purchase General American Life Insurance Company (General American).
In a related action, Moody's upgraded the credit ratings of General American (insurance financial strength to Aa2) and its affiliates following the acquisition by MetLife of General American and its affiliates. General American's insurance financial strength and the subordinated debt ratings and the insurance financial strength rating of Cova Financial Services Life Insurance Company (Cova) benefit from the explicit support provided by MetLife. The insurance financial strength rating of RGA Reinsurance Company (RGA), which is majority owned by General American and MetLife, was upgraded to A1 and benefits from its new ownership.
These rating actions conclude a review for General American and its affiliates that began on August 26. The outlook on all of the ratings in the MetLife group is stable.
Moody's noted that MetLife's financial leverage (total debt to total capital) ratio is currently at a historical high, but expects that this ratio will decline substantially as the company applies some of the proceeds of the upcoming IPO to reduce short term debt. In addition, the rating agency expects that short-term debt related to providing liquidity for the General American funding agreements will decline in the near term, as associated assets are sold or mature. The rating confirmation also incorporates the expectation that MetLife's risk based capital level will strengthen over the coming year.
Moody's said that the confirmation of MetLife's ratings was also based on the company's leading market positions in both the individual and group life businesses, a large career agent sales force, and a high-quality bond portfolio. MetLife also has a strong position in the large-case group life and non-medical health market, particularly in the profitable group life insurance line.
Moody's also noted that MetLife has shown stronger sales in its individual life products, improved agent retention rates, greater productivity among its career agents, and has made recent changes that more fully integrate the management of MetLife's and New England Financial's individual business operations. The rating agency said that MetLife's acquisition of General American would provide the company with a complementary distribution channel of independent general agents, additional distribution of annuities through broker dealers, and expense savings over time.
The rating agency said, however, that these strengths are somewhat offset by the slow industry growth outlook for individual life products, MetLife's shift of business toward lower-margined products, sizable exposure to commercial real estate, and relatively weak profitability in recent years. Although MetLife has implemented an in-depth plan of action to reduce its high cost structure and improve its earnings, its expense structure is still relatively high, Moody's added. According to the rating agency, the planned demutualization may shift management attention to issues of shareholder returns and may cause management to increase operational and financial risk.
The following ratings were confirmed:
Metropolitan Life Insurance Company -- insurance financial strength rating at Aa2; subordinated debt rating at A1.
Metropolitan Insurance & Annuity Company -- insurance financial strength rating at Aa3.
New England Life Insurance Company -- insurance financial strength rating at Aa2.
Security First Life Insurance Company -- insurance financial strength rating at Aa3.
New England Mutual Life Insurance Company -- subordinated debt rating at A1.
Metropolitan Property & Casualty Insurance Company -- insurance financial strength rating at Aa3.
Met Life Funding, Inc. -- short-term rating for commercial paper at Prime-1.
The following ratings were upgraded:
GenAmerica Corporation -- subordinated debt rating to A3 from Caa3.
GenAmerica Capital 1 -- preferred stock rating to "a3" from "caa".
General American Life Insurance Company -- insurance financial strength rating to Aa2 from B1; subordinated debt rating to A1 from Caa1.
Cova Financial Services Life Insurance Company -- insurance financial strength rating to Aa2 from B1.
Reinsurance Group of America -- senior debt rating to A3 from B3.
RGA Reinsurance Company -- insurance financial strength rating to A1 from Ba3.
Metropolitan Life Insurance Company, headquartered in New York, reported statutory assets of about $185 billion and statutory capital of approximately $11.5 billion as of September 30, 1999.
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