Fitch Downgrades Two MetLife Subsidiaries Related to Planned Brighthouse Financial Separation

CHICAGO--()--Fitch Ratings has downgraded the Insurer Financial Strength (IFS) ratings of MetLife Insurance Company USA (MetLife USA) and New England Life Insurance Company (NELIC) to 'A+' from 'AA-' and removed the ratings from Rating Watch Negative. At the same time, Fitch has affirmed the existing ratings assigned to MetLife, Inc. (MetLife) and its other subsidiaries. The Outlook on all ratings is Stable. A full list of rating actions is shown at the end of this release.

Today's rating actions follow Brighthouse Financial, Inc.'s (Brighthouse Financial) filing yesterday of a Registration Statement on Form 10 with the U.S. Securities and Exchange Commission associated with the planned separation of Brighthouse Financial-related businesses from MetLife. The ratings of these two entities were previously placed on Rating Watch Negative to reflect the likelihood that the ratings would be lower on a stand-alone basis. In addition to reflecting new financial information and strategic plans contained in the company's Form 10 filing, today's rating actions reflect Fitch's application of criteria for non-core entities to MetLife USA and NELIC, which are expected to be separated from MetLife and included in Brighthouse Financial. Fitch now views both entities to be of limited importance to their current parent.

The affirmation of the remainder of MetLife's ratings reflects Fitch's view that the company's strong balance sheet fundamentals, excellent financial flexibility, and very strong market positions in several major insurance product lines and markets in the U.S. and select international markets 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 pending separation of the Brighthouse Financial-related businesses as neutral to MetLife's ratings based on our view that 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.

KEY RATING DRIVERS

The downgrade of the entities that are expected to be separated reflects Fitch's view that the risk profile of Brighthouse Financial will be more exposed to capital market volatility and interest rate risk due to its business concentration in variable annuity and universal life with secondary guarantee businesses.

As core subsidiaries of MetLife, MetLife USA and NELIC's ratings have historically benefited from MetLife's broad diversification and scale. The one notch downgrade of the ratings reflects Fitch's view that, although Brighthouse Financial will be smaller relative to MetLife, its scale remains considerable and, as such, will continue to yield favourable levels of efficiency benefits. Fitch also views management's target financial leverage and risk-adjusted capitalization, as well as its risk management capabilities, as sufficient to offset a significant amount of the higher risk profile of Brighthouse Financial's product portfolio.

RATING SENSITIVITIES

For MetLife Insurance Company USA and New England Life Insurance Company:

Fitch's ratings on MetLife USA and NELIC assume a generally uneventful execution of Brighthouse Financial's spin-off from MetLife.

Fitch will apply its Prism capital model separately to Brighthouse Financial when information becomes available, which is likely to be in 2017. A Prism capital score below strong could cause Fitch to reassess its view of Brighthouse Financial's capital strength, which is heavily supportive of the rating.

For MetLife and other 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%, run-rate ROE below 10%, and GAAP fixed charge coverage ratio below 5x.

FULL LIST OF RATING ACTIONS

Fitch has removed from Rating Watch Negative and downgraded the following ratings:

MetLife Insurance Company USA

New England Life Insurance Company

--Insurer Financial Strength (IFS) to 'A+' to 'AA-'.

The Rating Outlook is Stable.

Fitch affirms the following ratings:

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'.

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

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

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 Global Funding I

--Medium-term note program at 'AA-'.

MetLife Short Term Funding LLC

--Commercial paper program at 'F1+'.

The Rating Outlook is Stable.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 15 Sep 2016)

https://www.fitchratings.com/site/re/887191

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Fitch Ratings
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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
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+1-312-368-3146
or
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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
James B. Auden, CFA
Managing Director
+1-312-368-3146
or
Media Relations
Hannah James, New York, +1-646-582-4947
hannah.james@fitchratings.com