Fitch Rates MetLife’s Funding Agreement Programs

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following new ratings to MetLife, Inc.'s (MetLife) funding agreement note programs:

MetLife Global Funding I

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

MetLife Institutional Funding II

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

MetLife Short Term Funding LLC

--Commercial paper program rated 'F1+'.

At the same time, Fitch has affirmed all existing ratings assigned to MetLife and its subsidiaries, including the 'AA-' Insurer Financial Strength (IFS) ratings assigned to certain domestic life insurance companies and 'A' Issuer Default Rating (IDR) assigned to MetLife. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release.

The ratings assigned to the funding agreement note programs reflect the credit quality of underlying funding agreements, and include a review of the legal structure of the respective programs, applicable state insurance regulations, and related legal opinions. Based on that review, Fitch has concluded that the legal structure allows Fitch to 'pass through' the rating of the insurance companies issuing the funding agreements to the programs and the notes issued herein.

MetLife Global Funding I (MGF) is a special purpose Delaware statutory trust organized for the sole purpose of issuing non-recourse notes secured by funding agreements issued to MGF by Metropolitan Life Insurance Company (MLIC), a New York domiciled life insurance company. Repayment of principal and payment of interest under the notes are sourced from cash flows generated from the funding agreements. Under New York insurance law, funding agreements rank pari passu with the claims of policyholders.

MetLife Institutional Funding II (MIF) is a special purpose Delaware statutory trust organized for the sole purpose of issuing non-recourse notes secured by funding agreements issued to MIF by MetLife Insurance Company of Connecticut (MICC), a Connecticut domiciled life insurance company. Repayment of principal and payment of interest under the notes are sourced from cash flows generated from the funding agreements. Under Connecticut insurance law, funding agreements rank pari passu with the claims of policyholders.

MetLife Short Term Funding LLC (MSTF) is a limited liability company organized in the state of Delaware for the sole purpose of issuing non-recourse commercial paper secured by funding agreements issued to MSTF by MLIC, MICC, and any other affiliated insurance company. Repayment of principal and payment of interest under the commercial paper are sourced from cash flows generated from the funding agreements.

The affirmation of MetLife's ratings reflects Fitch's view that the company's recent financial performance and balance sheet fundamentals remain consistent with rating expectations. Over the past year, Fitch believes that MetLife has made good progress with the integration of American Life Insurance Company (ALICO), which was acquired in late 2010.

MetLife's earnings and interest coverage ratios have shown steady improvement over the past year but remain somewhat below rating expectations. Fitch expects ROE to improve to the 11%-12% range in 2012 driven by increased earnings from International and modest growth in U.S. Fitch notes that the low interest rate environment represents a significant earnings headwind for MetLife and the industry, but recognizes that the company has in place an extensive interest rate hedging program to help mitigate the earnings impact over the intermediate term.

MetLife's strong balance sheet fundamentals reflect the company's strong risk-adjusted capitalization, favorable liquidity profile, and good asset quality. Fitch notes that the statutory capitalization of MetLife's U.S. and Japanese insurance operations are considered strong and in line with rating expectations. The company's U.S. life insurance subsidiaries (excl. ALICO) reported combined statutory capital and RBC ratio of $25.8 billion and 435%, respectively, at year-end 2011. The company's ALICO insurance operations, which represent MetLife's largest insurance business outside the U.S., reported statutory capital and surplus of $3.3 billion with its Japan operation reporting a solvency margin ratio of 880% at year-end 2011.

The company's financial leverage was 28% at year-end 2011, which declined from 30% at prior year end but remains somewhat above Fitch's rating expectations and the company's target range of 20%-25%.

Key rating triggers that could result in an upgrade of MetLife's ratings include an NAIC RBC ratio consistently above 450%, financial leverage ratio below 25%, GAAP interest coverage ratio in the 8x-10x range, and the successful integration of ALICO.

Key rating triggers that could result in a downgrade of MetLife's ratings include an NAIC RBC ratio below 350%, financial leverage ratio above 30%, and GAAP interest coverage ratio below 5x.

Fitch assigns the following ratings with a Stable Outlook:

MetLife Global Funding I

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

MetLife Institutional Funding II

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

MetLife Short Term Funding LLC

--Commercial paper program rated 'F1+'.

Fitch affirms the following ratings with a Stable Outlook:

MetLife, Inc.

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Senior notes (FDIC guaranteed under TLGP) due 2012 at 'AAA';

--5.375% senior notes due December 2012 at 'A-';

--5% senior notes due November 2013 at 'A-';

--floating-rate senior notes due August 2013 at 'A-';

--2.375% senior notes due February 2014 at 'A-';

--5.5% senior notes due June 2014 at 'A-';

--5% senior notes due 2015 at 'A-';

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

--7.717% senior notes due 2019 at 'A-';

--6.817% senior notes due 2018 at 'A-';

--5.25% sterling senior notes due 2020 at 'A-';

--4.75% senior notes due February 2021 at 'A-';

--5.375% senior notes due December 2024 at 'A-';

--6.5% senior notes due December 2032 at 'A-';

--5.875% senior notes due November 2033 at 'A-';

--6.375% senior notes due June 2034 at 'A-';

--5.7% senior notes due June 2035 at 'A-';

--5.875% senior notes due February 2041 at 'A-';

-common equity units backed by senior notes at 'A-';

--10.75% junior subordinated debentures due August 2039 at 'BBB';

--6.4% junior subordinated debentures due December 2036 at 'BBB';

--Floating-rate preferred stock, series A at 'BBB';

--Fixed-rate preferred stock series B 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+'.

MetLife Investors Insurance Company

MetLife Insurance Company of Connecticut

General American Life Insurance Company

MetLife Investors USA Insurance Company

New England Life Insurance Company

--IFS at 'AA-'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' dated Sept. 22, 2011.

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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Fitch Ratings
Primary AnalystDouglas L. Meyer, CFA, +1-312-368-2061
Managing Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary AnalystCynthia Crosson, +1-212-908-0863
Director
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Committee Chairperson
James B. Auden, CFA, +1-312-368-3158
Managing Director
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Email: [email protected]

Source: Fitch Ratings