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Fitch Affirms MetLife, Inc.'s Ratings; Outlook Stable
September 6, 2017 / 9:29 PM / 3 months ago

Fitch Affirms MetLife, Inc.'s Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, September 06 (Fitch) Fitch Ratings has affirmed all existing ratings assigned to MetLife, Inc. (MetLife) and its subsidiaries, including the Very Strong 'AA-' Insurer Financial Strength (IFS) ratings assigned to certain domestic life insurance companies and the 'A' Issuer Default Rating (IDR) assigned to MetLife. The Rating Outlook for MetLife and its subsidiaries is Stable. A full list of rating actions is shown at the end of this release. Today's rating actions follow Fitch's review of MetLife's operating performance through first-half 2017 and reflect the recent successful completion of the separation of former MetLife businesses that now comprise Brighthouse Financial, Inc. KEY RATING DRIVERS The affirmation of MetLife's ratings reflects the company's very strong business profile, supported by very strong market positions in several major insurance product lines and markets in the U.S. and select international markets, as well as Fitch's view that the company's strong balance sheet fundamentals and excellent financial flexibility remain consistent with rating expectations. Fitch believes that the company's large scale and very strong brand name will continue to provide the company with significant competitive advantages. Fitch views the separation of the Brighthouse Financial-related businesses as neutral to MetLife's ratings since any decline in diversification of MetLife as a result of the separation will largely be mitigated by the lower risk profile of the businesses remaining within MetLife. MetLife's ratings also consider the company's above-average investment risk, lower operating profitability in 2015 and 2016 and continued macroeconomic challenges associated with the ongoing low interest rate environment. Fitch views the uncertainty around MetLife's ultimate status relative to the potential non-bank systematically important financial institution (SIFI) designation to be credit neutral. MetLife's strong balance sheet fundamentals reflect the company's solid risk-adjusted capitalization and favorable liquidity profile. Fitch considers the statutory capitalization of MetLife's U.S. and Japanese insurance operations to be strong and in line with rating expectations. The company's domestic life insurance subsidiaries (excluding American Life Insurance Company) reported combined statutory total adjusted capital of approximately $22 billion at year-end 2016, which resulted in consolidated risk-based capital (RBC) of 436%. Total adjusted capital associated with statutory entities that were separated as part of Brighthouse amounted to approximately $5.4 billion at Dec. 31, 2016. MetLife's Japanese insurance subsidiary represents the company's largest insurance business outside the U.S. The Japanese subsidiary reported a statutory solvency margin ratio of 957% at the end of first quarter 2017, which is above both rating expectations and levels achieved by most Japanese peers. Holding company liquidity is derived from existing holding company cash balances and strong subsidiary dividend capacity, as well as the company's $2.5 billion commercial paper program and approximately $3.6 billion of unused corporate credit facilities at June 30, 2017. Operating company liquidity is enhanced by membership in the Federal Home Loan Bank system, which allows MetLife to access funding on a collateralized basis. Financial leverage increased to approximately 29% at June 30, 2017, reflecting $3 billion in senior notes issued by Brighthouse in preparation for its August separation. Although the notes are no longer a part of MetLife's capital structure, Fitch expects that the reduction in equity associated with the separation will leave MetLife's financial leverage at a temporarily elevated state into 2018. Fitch anticipates that the company's financial leverage will return to its recent run-rate level of approximately 25% over the next 12-18 months. Fitch views MetLife's operating profitability to be fundamentally sound, but notes ongoing pressure from low interest rates and, over the past year, reserve charges associated with its actuarial assumption review and modeling improvements, as well as expenses related to the separation of Brighthouse. First half 2017 operating earnings improved somewhat relative to the same period in 2016, but low interest rates continue to subdue earnings growth. Fitch views MetLife's fixed-charge coverage metrics to be modestly below median guidelines for its current ratings, but reasonable given the company's overall profile. Fitch expects coverage metrics to temporarily weaken in the second half 2017 relative to first half 2017 as a result of the separation of earnings related to the Brighthouse businesses. However, as financial leverage decreases over the next 12-18 months and separation-related expense dissipate, Fitch expects coverage metrics to return to previous run-rate levels. RATING SENSITIVITIES Key rating drivers that could lead to an upgrade of MetLife's ratings include NAIC risk-based capital ratio above 450%, financial leverage below 25%, and GAAP fixed charge coverage ratio above 9x. Key rating drivers that could lead to a downgrade of MetLife's ratings include NAIC risk-based capital ratio below 350%, financial leverage above 30%, run-rate ROE below 10%, and GAAP fixed charge coverage ratio below 5x. FULL LIST OF RATING ACTIONS Fitch affirms the following ratings with a Stable Outlook: MetLife, Inc. --Long-term IDR at 'A'; --Short-term IDR at 'F1'; --1.756% senior notes due 2017 at 'A-'; --1.903% senior notes due 2017 'A-'; --6.817% senior notes due 2018 at 'A-'; --7.717% senior notes due 2019 at 'A-'; --5.25% sterling senior notes due 2020 at 'A-'; --4.75% senior notes due 2021 at 'A-'; --3.048% senior notes due 2022 at 'A-'; --4.368% senior notes due 2023 'A-'; --5.375% senior notes due 2024 at 'A-'; --3.6% senior notes due 2024 at 'A-'; --3% senior notes due 2025 at 'A-'; --3.6% senior notes due 2025 at 'A-'; --6.5% senior notes due 2032 at 'A-'; --6.375% senior notes due 2034 at 'A-'; --5.7% senior notes due 2035 at 'A-'; --5.875% senior notes due 2041 at 'A-'; --4.125% senior notes due 2042 at 'A-'; --4.875% senior notes due 2043 at 'A-'; --4.05% senior notes due 2045 at 'A-'; --4.6% senior notes due 2046 at 'A-'; --6.4% junior subordinated debentures due December 2036 at 'BBB'; --10.75% junior subordinated debentures due August 2039 at 'BBB'; --4.721% senior notes due 2044 at 'A-'; --Floating-rate non-cumulative preferred stock, series A at 'BBB'; --5.25% fixed-to-floating rate non-cumulative preferred stock, series C at 'BBB'; --Commercial paper at 'F1'. MetLife Funding, Inc. --Commercial paper at 'F1+'. MetLife Capital Trust IV --7.875% trust securities at 'BBB'. Metropolitan Life Insurance Company --IFS at 'AA-'; --Long-term IDR at 'A+'; --Surplus notes at 'A'; --Short-term IDR at 'F1+'. General American Life Insurance Company --IFS at 'AA-'. Metropolitan Life Global Funding I --Medium-term note program at 'AA-'. MetLife Short Term Funding LLC --Commercial paper program at 'F1+'. Contact: Primary Analyst Bradley S. Ellis, CFA Director +1-312-368-2089 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson James B. Auden, CFA Managing Director +1-312-368-3148 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com. 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