A.M. Best Affirms Credit Ratings of Members of Brighthouse Insurance Group; Assigns Issuer Credit Ratings to Holding Companies

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of Brighthouse Life Insurance Company (Wilmington, DE), the largest operating entity for the group, New England Life Insurance Company (Boston, MA), and Brighthouse Life Insurance Company of NY (New York, NY), the New York marketing arm. These entities are collectively referred to as Brighthouse and are operating insurance subsidiaries of Brighthouse Financial, Inc. (Brighthouse Financial) (headquartered in Charlotte, NC) [Nasdaq:BHF], a holding company formed in 2016. The outlook of these Credit Ratings (rating) is stable.

Concurrently, A.M. Best has assigned a Long-Term ICR of “bbb+” to Brighthouse Financial and a Long-Term Issue Credit Rating (Long-Term IR) to its recently issued $1.5 billion of 3.7% senior unsecured notes due 2027, and $1.5 billion of 4.7% senior unsecured notes due 2047. The outlook assigned to these ratings is stable.

A.M. Best also has assigned a Long-Term ICR of “bbb+” to Brighthouse Holdings, LLC, Brighthouse Financial’s intermediate holding company, and a Long-Term IR of “bbb-” to its $50 million of fixed rate cumulative preferred units, Series A. The outlook assigned to these ratings is stable.

The ratings of Brighthouse reflect its adequate level of risk-adjusted capitalization, existing credit risk profile, demonstrated ability to access the capital markets and successful spin-off from MetLife, Inc. (MetLife) on Aug. 4, 2017. The company began trading on the Nasdaq on Aug. 7, 2017. A.M. Best notes that MetLife maintains approximately 19.2% ownership of Brighthouse Financial, but expects to continue to reduce its ownership position as soon as practicable, but in no event later than five years after the completion of the spin-off. Brighthouse will also continue to maintain several management agreements over the next couple years with MetLife, including the management of investment of the assets comprising the general account portfolio of its insurance company subsidiaries, to ensure a successful transition as a stand-alone public company. Post separation, Brighthouse remains among the largest life/annuity insurance carriers in the industry, with over $200 billion of assets. A.M. Best also believes that Brighthouse maintains a strong risk-management program, similar to that of MetLife, which is essential for the management of its elevated insurance and investment risk exposures.

While Brighthouse currently maintains an adequate level of risk-adjusted capitalization for its insurance and investment risks, capital and surplus will also be more exposed to the implementation of the company’s revised hedging program. While the company is protected from larger-tail risk scenarios, the current level of excess capital may be impacted negatively by a continuous moderate decline of interest rates and equity markets over the medium to longer term. In addition, capital and surplus has been impacted in recent periods by significant charges taken in the variable annuity due to changes in modeling and actuarial assumptions. While the company has reduced some of the risk in its product portfolio by ceasing the marketing of Universal Life with Secondary Guarantees and variable annuities with guaranteed minimum income benefits, Brighthouse’s future operating performance is correlated highly to the equity markets and the level of interest rates. A.M. Best notes that a significant portion of its fixed annuity account values remains at the guaranteed minimum interest rate, which heightens the risk of spread compression if interest rates remain low. A.M. Best will continue to monitor the company’s ability to execute as a newly formed publicly traded company, including its ability to build its new brand, effectively manage its elevated expense structure that is the result of the separation from MetLife, and its ability to add new distribution channels and life insurance product offerings to balance its annuity business, which currently represents approximately 90% of sales.

The following Long-Term IR has been affirmed, with a stable outlook:

MetLife Institutional Funding I, LLC — “a+” program rating

-- “a+” rating on the notes issued hereunder

The following Long-Term IR has been withdrawn:

MetLife Institutional Funding II, LLC — “a+” program rating

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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A.M. Best

Michael Adams, +1-908-439-2200, ext. 5133

Senior Financial Analyst

[email protected]

or

Ken Johnson, CFA, CAIA, FRM, +1-908-439-2200, ext. 5056

Senior Director

[email protected]

or

Christopher Sharkey, +1-908-439-2200, ext. 5159

Manager, Public Relations

[email protected]

or

Jim Peavy, +1-908-439-2200, ext. 5644

Director, Public Relations

[email protected]

Source: A.M. Best