December 15, 2017 / 2:56 PM / 9 months ago

Fitch Affirms MassMutual's Ratings; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, December 15 (Fitch) Fitch Ratings has affirmed all ratings for Massachusetts Mutual Life Insurance Company (MassMutual) and its wholly owned domestic insurance subsidiaries and affiliates. The Rating Outlook is Stable. A complete list of ratings follows at the end of this press release. KEY RATING DRIVERS Fitch's ratings consider MassMutual's very strong business profile, reflecting the company's strong market position in several major and broadly diversified business lines and very strong statutory capitalization. The ratings also consider the company's recent higher earnings variability from one-time charges, the ongoing impact of the low interest rate environment, and potential financial market volatility. MassMutual's very strong business profile reflects the company's leading position in the individual life insurance market selling participating whole life products through a career distribution system. MassMutual has a strong competitive position in many other lines of businesses, including group retirement and protection products, annuities and asset management capabilities, which provide diversification of earnings and cash flows. Fitch believes that the company's strong brand name, growing career distribution system, and strong earnings and cashflows from its asset management capabilities have provided the company significant competitive advantages. MassMutual's statutory capital is very strong and in line with rating expectations. At Dec. 31, 2016, total adjusted statutory capital (TAC) was $17.3 billion, risk-based capital (RBC) ratio was 459%, and the company had a Prism capital model score of 'Extremely Strong'. MassMutual's quality of capital is lower relative to that of highly rated mutual peers given its higher surplus notes to TAC ratio of 13%. However, this is largely offset by the company's conservative valuation of its asset management subsidiaries in reported statutory capital and lack of use of captives to finance redundant reserves. While surplus notes to TAC is above average, the ratio remains within Fitch's 15% guideline for standard surplus note notching. Fitch expects statutory financial leverage to decline modestly longer term due to growth in statutory capital. As of Sept. 30, 2017, MassMutual reported relatively low operating leverage of approximately 9x and asset leverage of approximately 14x, both of which are within rating expectations. Fitch considers MassMutual's profitability as moderate on an absolute basis and comparable with mutual peers. Recent operating performance has shown greater variability relative to historical results due partially to one-time charges. Operating results for the first three quarters of 2017 were higher relative to prior year due to strong investment performance, insurance margins, and higher fees from strong equity markets, but were partially offset by a one-time technology write-off and higher integration expenses related to the purchase of MetLife's retail distribution force. Operating results in 2016 were down relative to prior year as a result of acquisition costs of the aforementioned MetLife retail advisor purchase, lower net investment income, and increased reserves associated with variable annuity guarantees due to low interest rates. The ratings on C.M. Life Insurance Company (CM Life) and MML Bay State Life Insurance Company (MML Bay State), which are wholly owned subsidiaries of MassMutual, are based on Fitch's view that these entities are core operating companies within the MassMutual organization. MassMutual Global Funding, LLC is a limited liability company domiciled in the Cayman Islands. MassMutual Global Funding II is a statutory trust domiciled in the state of Delaware. The company and trust were established for the sole purpose of issuing debt instruments secured by funding agreements issued by MassMutual. RATING SENSITIVITIES Key rating sensitivities that could lead to an upgrade include: --NAIC RBC above 475% and maintaining a Prism capital model score of 'Extremely Strong'. --Surplus notes to TAC ratio below 9%. --Further growth and higher business concentrations in participating whole life business. Key rating sensitivities that could lead to a downgrade include: --Significant decline in TAC, NAIC risk-based capital ratio below 425%, or a Prism capital model score below 'Extremely Strong'. --Increased volatility in earnings due to unexpected losses. Rating sensitivities that could lead to wider notching of MassMutual's IDR include: --Surplus notes to TAC ratio above 15%. Fitch has affirmed the following ratings with a Stable Outlook: Massachusetts Mutual Life Insurance Company --Insurer Financial Strength (IFS) at 'AA+'; --Issuer Default Rating (IDR) at 'AA'; --$250 million 7.625% surplus notes due Nov. 15, 2023 at 'AA-'; --$100 million 7.5% surplus notes due March 1, 2024 at 'AA-'; --$250 million 5.625% surplus notes due May 15, 2033 at 'AA-'; --$310 million 8.875% surplus notes due June 1, 2039 at 'AA-'; --$400 million 5.375% surplus notes due Dec. 1, 2041 at 'AA-'; --$500 million 4.50% surplus notes due April 15, 2065 at 'AA-'; --$475 million 4.90% surplus notes due April 1, 2077 at 'AA-'; --Short-term IDR at 'F1+'; --Commercial paper program at 'F1+'. C.M. Life Insurance Company MML Bay State Life Insurance Company --IFS at 'AA+'. MassMutual Global Funding, LLC MassMutual Global Funding II --Secured notes program at 'AA+'. Contact: Primary Analyst Nelson Ma, CFA Director +1-212-908-0273 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Douglas Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Julie A. Burke, CPA, CFA Managing Director +1-312-368-3158 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Criteria (pub. 30 Nov 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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