Fitch Places Two MetLife Subsidiaries on Negative Watch; Affirms Holdco & Other Subs' Ratings

CHICAGO--()--Fitch Ratings has placed the ratings of MetLife Insurance Company USA (MetLife USA) and General American Life Insurance Company (GALIC) on Rating Watch Negative. At the same time, Fitch has affirmed the existing ratings and Stable Outlook assigned to MetLife, Inc. and certain subsidiaries. A full list of rating actions is shown at the end of this release.

Today's rating action follows MetLife's announcement yesterday that it will pursue a separation of a substantial portion of its U.S. Retail segment, which may involve a public offering, a spin-off, or a sale. Management has indicated that MetLife USA and GALIC will be included in the new company and cited completion of a strategic review and assessment of current regulatory environment as key drivers behind this proposed restructuring initiative.

KEY RATING DRIVERS

The Rating Watch Negative status reflects Fitch's view that the operating risk profile of the new company is more exposed to capital market volatility and interest rate risk due to the company's business concentration in variable annuity and universal life with secondary guarantee businesses. Existing ratings assigned to MetLife USA and GALIC benefit from the broad diversification and scale of the MetLife enterprise, which includes very strong competitive positions in group, voluntary and worksite; corporate benefit funding; and international insurance Accordingly, it is likely that the ultimate ratings of the separated entities would be lower than the current ratings, unless the higher operating risk profile is sufficiently mitigated via extremely strong capitalization, or other methods for which details are not yet available.

Fitch notes too that the announcement yesterday by MetLife, in and of itself, indicates to Fitch that the businesses targeted for separation may no longer be 'core', as defined under Fitch's group rating methodology. Non-core businesses are often rated at, or closer to, their stand-alone levels, with less uplift for group support. Fitch will consider possibly prior to any further announcements by MetLife of its strategic intentions with these business, if these entities should be downgraded to reflect such a potential non-core designation. This will follow additional stand-alone analysis by Fitch.

RATING SENSITIVITIES

For two subsidiaries on Rating Watch Negative:

Fitch may downgrade ratings upon application of criteria for non-core entities as mentioned above or upon further announcements by the company of strategic plans.

For MetLife and remaining subsidiaries:

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%, and GAAP fixed charge coverage ratio below 5x.

FULL LIST OF RATING ACTIONS

Fitch places the following ratings on Rating Watch Negative:

MetLife Insurance Company USA

General American Life Insurance Company

--Insurer Financial Strength (IFS) 'AA-'.

Fitch affirms the following ratings with a Stable Outlook:

MetLife, Inc.

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--6.75% senior notes due 2016 at 'A-';

--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-';

--3.0% 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'.

MetLife Capital Trust X

--9.25% trust securities at 'BBB'.

Metropolitan Life Insurance Company

--IFS at 'AA-';

--IDR at 'A+';

--Surplus notes at 'A';

--Short-term IDR at 'F1+'.

New England 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+'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997822

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997822

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Bradley Ellis, CFA
Director
+1-312-368-2089
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Douglas L. Meyer, CFA
Managing Director
+1-312-368-2061
or
Committee Chairperson
Julie A. Burke, CPA, CFA
Managing Director
+1-312-368-3158
or
Media Relations:
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Bradley Ellis, CFA
Director
+1-312-368-2089
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Douglas L. Meyer, CFA
Managing Director
+1-312-368-2061
or
Committee Chairperson
Julie A. Burke, CPA, CFA
Managing Director
+1-312-368-3158
or
Media Relations:
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com