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Rating Action:

Moody's affirms MetLife ratings (A2 senior); changes outlook to negative

09 Feb 2009

Approximately $43 billion of securities affected

New York, February 09, 2009 -- Moody's Investors Service today affirmed MetLife, Inc.'s (MetLife; NYSE: MET) credit ratings (senior debt at A2 and short-term debt rating at Prime-1) and the Aa2 insurance financial strength (IFS) ratings of its subsidiaries, including Metropolitan Life Insurance Company (MLIC), but changed the outlook for the companies to negative from stable.

In affirming the ratings, Moody's cited MetLife's strong brand recognition and leading market positions in both individual and group life businesses, diversified distribution system with a large career agent sales force, substantial and strong capital base, and the company's very diversified business mix with strong earning capacity.

"These strengths provide a measure of support for MetLife's credit profile in the current stressful market environment, " Ann Perry, Moody's Vice President and Senior Credit Officer said.

The rating agency said that MetLife's liquidity position continues to strengthen. The company has substantially increased its cash and short term investments at year-end, has reduced its securities lending portfolio to $23 billion from over $50 billion at mid-year 2007, and is maintaining $2.8 billion of cash at the holding company (following its $2.3 billion equity raise last year). The company has no significant debt maturities until 2011. The conversion of a hybrid security this month should bring an additional $1 billion of cash to the holding company.

However, Moody's said the change in MetLife's rating outlook to negative primarily reflects the pressures on its profitability and financial flexibility emanating from higher levels of investment losses and from the weak economy and capital markets over the medium-term.

"The recessionary environment and the weak equity markets, combined with MetLife's risk reduction initiatives, will hurt the company's revenue growth and earnings capacity in most of its businesses," Moody's Perry said.

The rating agency also sees higher losses on the company's real estate-related and structured holdings (i.e., RMBS, CMBS, commercial mortgage loans, etc.), as well as rising corporate defaults and lower alternative investment returns.

That said, Moody's believes the ultimate economic losses from MetLife's investments are likely to be significantly less than the current market values suggest. The company reported $22 billion of net pre-tax unrealized losses at year-end 2008. Its strong liability profile and large cash position also mitigate the need to sell assets at distressed market prices.

Moody's said that the constrained earnings and additional investment losses will continue to pressure its cashflow and earnings coverage metrics, which are currently below the rating agencies' expectations for a Aa2 IFS rating. The expected strain on regulatory earnings and capitalization will lower the dividend capacity from the operating companies to the holding company, impinging its flexibility.

Moody's said a downgrade of MetLife's ratings could result from the following: 1) adjusted financial leverage rises to the 25-30% range, 2) cashflow coverage and earnings coverage fall below 4 times and 7 times, respectively, 3) NAIC RBC falls below 350% consistently, 4) the company incurs significant further gross investment losses (above $2 billion pre-tax) or, 5) it pursues acquisitions that raise its risk profile.

A return to a stable outlook could result from: 1) the company achieves a sustained reduction in adjusted financial leverage to below 25%, 2) a NAIC RBC level greater than 350% is sustained, 3) cashflow coverage and earnings coverage are greater than 5 times and 8 times, respectively, 4) the company pursues in-market acquisitions that achieve significant cost savings and franchise improvement, and 5) gross investment losses are less than $1 billion pre-tax in 2009.

The following ratings have been affirmed with a negative outlook:

MetLife, Inc. - senior unsecured debt at A2; preferred stock at Baa1; short-term debt rating at Prime-1; provisional subordinated debt shelf at (P)A3;

MetLife Capital Trust III,-- backed trust preferred at A3

MetLife Capital Trust IV, X -- backed preferred stock at Baa1

Metropolitan Life Insurance Company - insurance financial strength at Aa2; surplus notes at A1

MetLife Investors Insurance Company - insurance financial strength at Aa2

Metropolitan Life Global Funding I - backed senior secured debt and MTN at Aa2

General American Life Insurance Co. - insurance financial strength at Aa2; surplus notes at A1

New England Life Insurance Company - insurance financial strength at Aa2

New England Mutual Life Insurance Company - surplus notes at A1;

MetLife Insurance Company of Connecticut -- insurance financial strength at Aa2;

MetLife of Connecticut Institutional Funding Ltd. -- backed senior secured debt and MTN at Aa2

MetLife of Connecticut Global Funding I - backed senior secured debt and MTN at Aa2

MetLife Institutional Funding I, LLC - funding agreement-backed EMTN program at Aa2

Metropolitan Tower Life Insurance Company - insurance financial strength at Aa3

MetLife Investors USA Insurance Company - insurance financial strength at Aa2

The following ratings were affirmed with a stable outlook:

Metropolitan Life Insurance Company. -- short-term insurance financial strength at Prime-1;

MetLife Insurance Company of Connecticut -- short-term insurance financial strength at Prime-1

MetLife Funding, Inc. -- short-term debt rating at Prime-1

Moody's also withdrew the Aa2 IFS rating of MetLife Life and Annuity Company of Connecticut as the company was merged into MetLife Insurance Company of Connecticut in 2007.

MetLife, Inc., headquartered in New York, reported total assets of about $502 billion and shareholders' equity of approximately $23.7 billion as of December 31, 2008.

Moody's last rating action on MetLife was on November 4, 2008 when Moody's affirmed MetLife, Inc.'s credit ratings (senior debt at A2 and short-term debt rating at Prime-1) and the Aa2 insurance financial strength ratings of its subsidiaries, including Metropolitan Life Insurance Company (MLIC).

The principal methodologies used in rating MetLife is "Moody's Global Rating Methodology for Life Insurers", which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating MetLife can also be found in the Credit Policy & Methodologies directory.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

Visit Moody's website at www.moodys/insurance.com for more information.

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms MetLife ratings (A2 senior); changes outlook to negative
No Related Data.
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