A.M. Best Removes From Under Review and Affirms Credit Ratings of MetLife Inc. and Its Subsidiaries; Downgrades Credit Ratings of Brighthouse Subsidiaries

A.M. Best has removed from under review with developing implications and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of the Metropolitan Life Insurance Company (MLIC) (New York, NY), General American Life Insurance Company (St. Louis, MO) and Metropolitan Tower Life Insurance Company (Wilmington, DE) (collectively called RemainCo). Additionally, the Long-Term ICR of “a-” of MetLife, Inc. (MetLife) (headquartered in New York, NY) [NYSE: MET] and its existing Long-Term Issue Credit Ratings have been removed from under review and affirmed.

Concurrently, A.M. Best has removed from under review with developing implications and downgraded the FSR to A (Excellent) from A+ (Superior) and the Long-Term ICR to “a+” from “aa-” of MetLife Insurance Company USA (Wilmington, DE), New England Life Insurance Company (Boston, MA) and First MetLife Investors Insurance Company (New York, NY). These entities (collectively referred to as Brighthouse) will be held under Brighthouse Financial, Inc., a newly formed holding company.

A.M. Best also has removed from under review with developing implications and affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” of MetLife’s property/casualty companies, consisting of Metropolitan Property and Casualty Insurance Company, and seven fully reinsured subsidiaries, as well as a separately rated subsidiary, Metropolitan Group Property and Casualty Insurance Company (both domiciled in Warwick, RI) (together referred to as MetLife Auto & Home).

The outlook assigned to these Credit Ratings (ratings) is stable. (See link below for a detailed listing of the companies and ratings.)

The ratings of MetLife and its subsidiaries were placed under review with developing implications in January 2016 after the company announced its intent to separate a substantial portion of its U.S. retail segment via an initial public offering, spin-off or sale. On Oct. 5, 2016, Brighthouse Financial Inc. (Brighthouse) filed a registration statement on Form 10 with the Securities and Exchange Commission describing its planned separation from MetLife. Brighthouse’s operating earnings represents approximately 20% of MetLife’s total operating earnings and 50% of its retail segment’s operating earnings.

The rating downgrades of Brighthouse reflect its less creditworthy liability profile and the fact that it will no longer benefit from the strength and support of MetLife, as well as its related diversified businesses. A.M. Best notes that the business that resides within Brighthouse is more capital intensive and includes variable annuities with living benefit riders and universal life with secondary guarantees, which increases the group’s exposure to market volatility and interest rate risk.

A.M. Best notes the significant reserve charge taken in the second quarter of 2016 due to revisions to policyholder behavior assumptions on its variable annuity line of business and believes that similar charges may occur in the future. Execution risk with the separation will be an ongoing concern over the next few years, including branding acceptance and MetLife’s ability to complete the ultimate separation as planned. However, A.M. Best acknowledges the experience and strong capabilities of the Brighthouse management team, which has managed MetLife’s retail segment for the past several years. In addition, A.M. Best expects the entities to remain well-capitalized with strong risk-management capabilities.

The rating affirmations of RemainCo reflect its industry leading position in the group insurance markets and international presence in which it holds several market leading positions in mature and emerging markets. A.M. Best believes that RemainCo will benefit from more streamlined operations, the ability to focus more intently on its existing businesses and its reduced exposure to higher risk insurance products. However, A.M. Best does note that the company maintains an elevated level of risk within its investment portfolio, including commercial-mortgage loans and alternative investments, which remains above industry averages. In addition, the company continues to face a challenging economic and market environment within its existing business lines, including increased volatility in certain emerging and international markets in which MetLife operates.

While MetLife maintains adequate financial leverage at approximately 25% and favorable interest coverage ratios, its operating leverage remains relatively high compared to similarly rated peers. In addition, A.M. Best expects MetLife’s financial leverage will increase as a result of the spin-off, but will remain within A.M. Best’s guidelines for its current rating.

For a complete listing of MetLife’s FSRs, Long-Term ICRs and Long- and Short-Term Issue Credit Ratings, please visit MetLife Inc.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.

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