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16 Dec 2009
Approximately $43 billion of securities affected.
New York, December 16, 2009 -- Moody's Investors Service today lowered MetLife, Inc.'s (MetLife;
NYSE: MET) credit ratings (senior debt to A3 from A2) and the insurance
financial strength (IFS) ratings of its subsidiaries, including
Metropolitan Life Insurance Company (MLIC), to Aa3 from Aa2.
The rating outlook for the group is stable.
Commenting on the rating action, Moody's Vice President and Senior
Credit Officer Ann Perry said, "MetLife's downgrade
reflects a continued build-up of factors that have incrementally
weakened the company's earnings generation and financial flexibility
relative to peer companies. We believe the company's earnings
and cash flow coverage metrics will be constrained over the medium term,
driven by the weak economy, elevated levels of investment losses,
and lower than previous levels of alternative investment income."
Moody's added that the strain from regulatory capital requirements
has lowered the ability to dividend from the operating companies to the
holding company. The ability of the operating companies to increase
dividends is dependent on future statutory earnings and capital requirements.
However, Moody's does not expect significant improvement in
cash flow coverage to occur in the near-to-medium term.
The rating agency added that MetLife's financial leverage--at
just under 30%--has persistently been at the high
end of the range for Aa-rated insurers, especially when considering
the company's use of hybrid securities in its capital structure.
The rating agency said that it is now expecting higher losses in various
asset classes including commercial real estate, CMBS, RMBS,
and commercial mortgage loans. As a result Moody's projects
that MetLife will experience higher losses than previously anticipated
in these sectors, as well as lower than historical levels of alternative
investment returns. Moody's said that the impact of these
higher investment losses and resulting lower net income has constrained
capital and that any improvement will take some time to materialize.
Although MetLife has significantly reduced the size of its large securities
lending program, the rating agency said that it still had concerns
about the asset liability management and liquidity challenges of managing
a large portfolio of short term liabilities.
Finally, Moody's said that the downgrade was also influenced
by the potential impact on the company's financial profile from
a stress scenario that incorporates substantially increased investment
losses and a sharp downturn in the equity markets.
According to the rating agency, the Aa3 IFS rating and stable outlook
reflects MetLife's strong brand recognition, significant operating
scale with leading market positions in both the individual and group life
businesses, diversified product and distribution capabilities,
and frequent and reliable access to various capital markets--all
of which provide the company with distinctive competitive advantages.
These strengths provide a measure of downside protection to MetLife's
credit profile even in the most stressful market environment of late 2008/early
2009. MetLife's issuance of capital (over $6 billion in
debt and equity in 2008 and 2009), has helped to bolster the company's
capital and liquidity and mitigate its capital strain during the financial
The following ratings have been downgraded with a stable outlook:
MetLife, Inc. - senior unsecured debt to A3 from A2;
preferred stock and junior subordinated debt to Baa2 from Baa1; provisional
senior debt shelf to (P)A3 from (P)A2; provisional subordinated debt
shelf to (P)Baa1 from (P)A3; provisional preferred shelf to (P)Baa2
from (P)Baa1; short-term debt rating for commercial paper
to Prime-2 from Prime-1;
MetLife Capital Trust IV, X -- backed preferred stock
to Baa2 from Baa1;
Metropolitan Life Insurance Company - insurance financial strength
to Aa3 from Aa2; surplus notes to A2 from A1;
MetLife Investors Insurance Company - insurance financial strength
to Aa3 from Aa2;
Metropolitan Life Global Funding I - backed senior secured debt
and MTN program to Aa3 from Aa2;
General American Life Insurance Co. - insurance financial
strength to Aa3 from Aa2; surplus notes to A2 from A1;
New England Life Insurance Company - insurance financial strength
to Aa3 from Aa2;
New England Mutual Life Insurance Company - surplus notes to A2
MetLife Insurance Company of Connecticut -- insurance financial
strength to Aa3 from Aa2;
MetLife of Connecticut Institutional Funding Ltd. --
backed senior secured debt and MTN program to Aa3 from Aa2;
MetLife of Connecticut Global Funding I - backed senior secured
debt and MTN program to Aa3 from Aa2;
MetLife Institutional Funding I, LLC - funding agreement-backed
EMTN program to Aa3 from Aa2;
MetLife Investors USA Insurance Company - insurance financial strength
to Aa3 from Aa2.
The following ratings were affirmed with a stable outlook:
Metropolitan Tower Life Insurance Company - insurance financial
strength at Aa3;
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 for commercial paper at Prime-1.
Moody's affirmation of Metropolitan Tower Life Insurance Company's
IFS rating at Aa3, reflects the alignment of the ratings of this
subsidiary with MetLife's other U.S. life insurance
companies given the unified branding, integration, and centralized
MetLife, Inc., headquartered in New York, reported
total assets of about $535 billion and MetLife, Inc.'s
stockholders' equity of $34.3 billion as of September 30,
Moody's last rating action on MetLife was on June 30, 2009 when
Moody's affirmed with a negative outlook MetLife, Inc.'s
credit ratings (senior debt at A2 and short-term debt rating at
Prime-1) and the Aa2 IFS ratings of its subsidiaries, including
Metropolitan Life Insurance Company. On that date, Moody's
also assigned a Baa1 rating to MetLife's $500 million issuance
of junior subordinated debentures scheduled to mature in 2039.
The principal methodology used in rating MetLife was Moody's Global Rating
Methodology for Life Insurers, published in September 2006 and available
on www.moodys.com in the Rating Methodologies subdirectory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies subdirectory on Moody's website.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually pay senior policyholder claims and
Visit Moody's website at www.moodys/insurance.com for more
Financial Institutions Group
Moody's Investors Service
Moody's lowers MetLife ratings (senior debt to A3); stable outlook
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
No Related Data.
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