A.M. Best Assigns Indicative Debt Rating to MetLife, Inc.'s Debentures.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 25, 2003 A.M. Best Co. has assigned an "a+" indicative senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating to MetLife, Inc.'s (MetLife or the Company) (NYSE NYSE See: New York Stock Exchange : MET) (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 ) $1.00625 billion aggregate principal amount of its 3.911% debentures, due May 15, 2005. These debentures result from a remarketing of debentures originally issued at the Company's IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. . In connection with this remarketing, A.M. Best has withdrawn its "a" trust-preferred securities rating on the capital securities originally issued by MetLife Capital Trust I (the Trust) in April 2000. A rating will be formally assigned to the debentures upon review of final documentation on the securities. As part of Metropolitan Life Insurance Company's (New York) demutualization Demutualization The process of changing corporate structure from a mutual fund company to some other form, such as a limited liability or corporation. Notes: This means mutual/life insurance companies convert from policyholder companies to stock companies. in 2000, the Trust issued equity security units (ESUs) with each unit being comprised of one capital security of the Trust and one contract to purchase common shares of MetLife on May 15, 2003, for $50. The rating withdrawal is coincidental with MetLife's dissolution of the Trust in accordance with the terms of the capital securities. Additionally, A.M. Best affirmed the long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. ratings on the group's outstanding senior notes, surplus notes and the indicative ratings under the shelf registration, as well as the commercial paper programs at MetLife, Inc. and MetLife Funding, Inc., the organization's centralized financing entity. The financial strength ratings of A+ (Superior) on MetLife's primary life/health operating subsidiaries are unaffected. Following the debenture remarketing, there is $743 million in remaining availability under MetLife's existing $4.0 billion universal shelf registration. The debentures rank pari-passu with other senior, unsecured and unsubordinated debt Unsubordinated Debt A loan or security that ranks above other loans or securities with regard to claims on assets or earnings. Also known as a senior security. Notes: , including $1.0 billion and $1.25 billion of outstanding senior notes issued by MetLife in December 2002 and November 2001, respectively. The remarketed debentures contain identical terms to the existing debentures, including the same maturity date as well as an interest deferral option whereby MetLife may defer quarterly interest payments without triggering a default. However, by exercising this option, MetLife may not make interest or principal payments on other equally ranking or subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , pay cash dividends on or repurchase any of its common or preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. or make payments related to any guaranteed debt of the Company or its subsidiaries. A.M. Best does not anticipate MetLife will exercise this option as long as its financial strength and liquidity continue to remain strong. MetLife did not receive any proceeds from this remarketing since the remarketing was conducted on behalf of the holders of the equity security units issued at the Company's IPO. Nearly all of the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). were used to purchase certain U.S. Treasury securities U.S. Treasury securities Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. , which serve as collateral for the purchase contracts. On May 15, 2003, approximately $1.006 billion in proceeds from the maturing purchase contracts, which form part of the equity security units, will be paid to MetLife in exchange for common shares. Following the remarketing and the issuance of equity from exercise of the forward purchase contracts, A.M. Best estimates that MetLife's proforma financial leverage as of December 31, 2002--defined as total borrowings (excluding non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue , non-core short-term borrowings and preferred securities) to total capital--is approximately 22%. This reflects moderately higher leverage from the company's prior year-end financial leverage ratio of approximately 15%. Nonetheless, this level is consistent with A.M. Best's expectations that such ratio will not exceed 30% over the near to medium term. Debt servicing capacity is expected to remain strong, with proforma interest coverage in the mid-single digits. Further, a recent restacking of certain insurance subsidiaries should improve MetLife's ability to access available dividend capacity throughout the organization. The indicative rating reflects the debentures' structural priority as senior obligations and their short-term tenor. The indicative rating also recognizes MetLife's financial flexibility, diverse earnings stream, strong liquidity, effective cost reduction initiatives and solid business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point . Offsetting these strengths are its increased investment losses and the risk-adjusted capital position of the consolidated insurance entities, which in recent years were weakened due to aggressive management of capital that focused on improving shareholder returns. A.M. Best views favorably recent actions taken by management to enhance the lead life insurer's long-term financial strength and noticeably improve the life/health insurance operation's overall risk-adjusted capital, including recent capital contributions, the sale of real estate assets and the suspension of share buybacks at MetLife. For a list of MetLife Inc.'s debt and financial strength ratings, visit http://www.ambest.com/press/022503metlife4.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. |
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