MetLife (MET) And Units Receive Rating Action From A.M Best
Zacks Investment Research | Oct 04, 2017 09:27PM ET
MetLife Inc (NYSE:MET) and its subsidiaries have received rating action from A.M. Best. The rating giant has affirmed Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of MetLife along with its Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR).
Moreover, A.M Best has reiterated the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICR of “aa-” of the Metropolitan Life Insurance Company, General American Life Insurance Company and Metropolitan Tower Life Insurance Company.
This apart, the rating giant has further affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” of MetLife’s Auto & Home affiliates group. The group includes Metropolitan Property and Casualty Insurance Company, seven fully reinsured subsidiaries and a separately rated subsidiary — Metropolitan Group Property and Casualty Insurance Company. The outlook of these Credit Ratings remained stable.
This rating actions acknowledges MetLife’s leading position in the group insurance market along with its vast geographic presence. The rating giant expects MetLife to gain steam from its focused business strategies like the spin-off of Brighthouse Financial. The divestment helped MetLife in lowering its exposure to softening interest rates and equity market sensitivity. Post the divestiture, MetLife generates almost half of its operating earnings from international business.
Notably, despite the sustained soft interest rate environment, MetLife managed to generate strong revenues, stable operating earnings and cash flows, indicating its operational efficiency. The rating giant believes that this will contribute to the company’s organic earnings growth along with improving expense management. MetLife has also been able to maintain its financial leverage and interest coverage ratios within A.M. Best's expectations.
However, these positives are partially offset by the high level of risks in its investment portfolio. A.M. Best believes that the risks stem from its securities lending and funding agreement-backed securities programs. Although operating leverage remains within A.M. Best’s guidelines for its current rating on a consolidated basis, the rating giant expects MetLife to successfully manage its leverage going forward.
MetLife is exposed to the possibility of earnings decline related to its run-off of MetLife Holdings segment and the Brighthouse spin-off in the short term. The present volatility within some existing business lines and stiff competition within group benefits and the emerging markets in which MetLife operates also remain headwinds. Well reflective of these negatives, its shares have gained 11% in the last year, underperforming the Zacks Investment Research
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