A.M. Best Affirms Financial Strength and Debt Ratings of Metropolitan Life and Affiliates.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--June 21, 2002 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of A+ (Superior) of Metropolitan Life Insurance Company, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , the primary insurance company of MetLife, Inc. (NYSE NYSE See: New York Stock Exchange : MET) and its affiliates. The financial strength rating of A (Superior) of MetLife Auto & Home is also affirmed and applies to its eight fully reinsured subsidiaries led by Metropolitan Property and Casualty Insurance Company. Additionally, A.M. Best affirmed MetLife, Inc.'s "a+" senior debt rating on $1.25 billion of outstanding senior notes and "AMB-1+" rating on the commercial paper programs at MetLife, Inc. and MetLife Funding, Inc. Ratings on the group's outstanding surplus notes, trust preferred securities and indicative ratings under MetLife's shelf offering were also affirmed. These ratings reflect the organization's diverse and substantial sources of revenue and earnings, its well-established brand name, the prominent market positions of its principal life insurance lines of business, the successful integration of its multi-channel distribution system and the overall balance in its investment management, property/casualty, international and financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. subsidiaries. These ratings recognize the strong liquidity position, moderate financial leverage, solid debt service capacity and added financial flexibility from retaining access to the capital markets as a publicly traded stock company. The group has sharpened sharp·en tr. & intr.v. sharp·ened, sharp·en·ing, sharp·ens To make or become sharp or sharper. sharp its strategic focus by divesting non-core and less profitable businesses and expanded market share through organic growth and strategic acquisitions, both domestically and abroad. On May 24, MetLife announced its prospective acquisition of Aseguradora Hidalgo Hidalgo, state, Mexico Hidalgo (ēthäl`gō), state (1990 pop. 1,888,366), 8,058 sq mi (20,870 sq km), central Mexico. Pachuca de Soto is the capital. , S.A. (Hidalgo), Mexico's largest life insurer, for approximately $965 million. MetLife gains valuable size through Hidalgo's group and individual life insurance operations--with estimated market share of 34% and 23%, respectively. A.M. Best views the acquisition positively given Hidalgo's position as the primary provider to government employees, potential cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. from integration with existing operations in Mexico, revenue enhancement revenue enhancement An increase in revenues, especially by way of increased taxes. Revenue enhancement includes reducing taxpayer deductions and eliminating tax credits. opportunities with state quasi-government groups and prospective expansion into the private employer market through worksite marketing. The transaction is expected to close by July 2002. Partially offsetting these strengths was MetLife's aggressive management of its capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , which was weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. in 2001 due to
extraordinary dividends paid to the parent. As a result, the insurance
company's risk-adjusted capital falls below that of similarly rated
peers. A significant amount of available funds--approximately $2.4
billion prior to completion of the Hidalgo acquisition--remain at the
parent company and within the MetLife organization, albeit outside the
insurance company's control. A.M. Best expects to see management
noticeably no·tice·a·ble adj. 1. Evident; observable: noticeable changes in temperature; a noticeable lack of friendliness. 2. Worthy of notice; significant. improve the current level of risk-adjusted capital at Metropolitan Life Insurance Company over the next six to 12 months to a level commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with other Superior-rated companies. Should this not occur, the outlook on the rating will be negative. Nevertheless, in A.M. Best's opinion, MetLife has the financial resources to improve capital and will be in ongoing dialogue with management regarding these future actions. Although progress has been made, A.M. Best notes MetLife's profitability, as measured by return on average assets and equity, continues to fall below the results of similarly rated peers driven by a higher-than-average expense structure. MetLife continues to work toward aggressively lowering expenses and improving profitability, actions A.M. Best anticipates will generate future positive results. As of March 31, 2002, MetLife's financial leverage defined as total borrowings--debt plus preferred securities to total capital--was approximately 25%, a ratio that remains in line with peers and is consistent with A.M. Best's expectations. Further, the proforma debt service coverage remains in the mid-single digits. The group has availability under its commercial paper programs at both MetLife Funding and MetLife, Inc., with approximately $553 million and zero outstanding, respectively, as of March 31, 2002. In addition, MetLife's revolving bank facilities, when aggregated, total $2.25 billion in available funds--subject to compliance with covenants and no material adverse change. Given the group's maximum average commercial paper outstandings in 2001, this represents over 100% backup liquidity. For the year ending December 31, 2001, MetLife reported total revenues of approximately $32 billion. As of March 31, 2002, the company reported consolidated assets of $259 billion and stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of approximately $15 billion (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). For a comprehensive list of the actions taken on MetLife's financial strength ratings and debt ratings, please visit http://www.ambest.com/press/metlife2.pdf. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. --30--md/ny* csm
CONTACT: A.M. Best, Oldwick
Jim Peavy, 908/439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Striegel, 908/439-2200, ext. 5378
rachelle.striegel@ambest.com
or
Michelle Lynn McGuirk, 908/439-2200, ext. 5056
michelle.mcguirk@ambest.com
KEYWORD: NEW JERSEY
INDUSTRY KEYWORD: INSURANCE
SOURCE: A.M. Best
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