S&P Lowers MetLife's (MET) MetLife Assurance Rating to 'A-', Outlook Stable
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Price: $71.11 +1.66%
Overall Analyst Rating:
BUY (
Down)
Dividend Yield: 3.2%
Revenue Growth %: +15.2%
Overall Analyst Rating:
BUY (
Down)Dividend Yield: 3.2%
Revenue Growth %: +15.2%
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Standard & Poor's Ratings Services said today that it lowered its insurer financial strength and counterparty credit ratings on MetLife Assurance Ltd. -- a unit of MetLife (NYSE: MET) -- to 'A-' from 'A+'. The outlook is stable.
The ratings reflect our view of the company's fair business risk profile (BRP) and strong financial risk profile (FRP), based on very strong capital adequacy and a limited competitive position. The 'bbb+' anchor is the higher of indicative anchors ('bbb+' and 'bbb'), primarily due to capital strength. The financial strength rating reflects one notch of group support based on our assessment that MAL is moderately strategically important to the MetLife group, and our belief that MetLife will support MAL in potential periods of distress.
"We believe that the long-term support for MAL by the parent is reduced from historical levels primarily because MAL's medium-term prospects of success in its chosen market are limited," said Standard & Poor's credit analyst Shellie Stoddard. The U.K. bulk annuity market is highly competitive and MAL has failed to achieve scale in the six years since its inception. MetLife's decision to reallocate MAL's surplus so that it could potentially withdraw capital from the subsidiary supports our view that management does not intend to invest heavily in the business. We expect MAL to write little new business.
Although MAL has some liabilities associated with several buy-outs of Irish pension schemes, the majority of the company's liabilities are U.K. annuities. We therefore consider the company as having low industry and country risk. Our view is supported by our positive opinion of the U.K.'s institutional framework and the industry's strong track record of minimizing asset-liability mismatches. We consider the sector to be highly competitive; nevertheless, we believe that life insurers in the U.K. will maintain moderate levels of
profitability.
The stable outlook reflects our view that MAL's financial profile will remain stable.
We could raise the ratings if:
-- Group management were to demonstrate MAL plays a more important part in group strategy; or
-- Our assessment of MAL's competitive position were to strengthen through increased new business activity, particularly with a less-narrow BRP.
Conversely, we might lower the ratings if:
-- We believed capital will decline due to higher-than-anticipated dividends; or
-- The company's liability profile is more volatile than expected. This might be due to significant reserve movements through changes in longevity assumptions.
The ratings reflect our view of the company's fair business risk profile (BRP) and strong financial risk profile (FRP), based on very strong capital adequacy and a limited competitive position. The 'bbb+' anchor is the higher of indicative anchors ('bbb+' and 'bbb'), primarily due to capital strength. The financial strength rating reflects one notch of group support based on our assessment that MAL is moderately strategically important to the MetLife group, and our belief that MetLife will support MAL in potential periods of distress.
"We believe that the long-term support for MAL by the parent is reduced from historical levels primarily because MAL's medium-term prospects of success in its chosen market are limited," said Standard & Poor's credit analyst Shellie Stoddard. The U.K. bulk annuity market is highly competitive and MAL has failed to achieve scale in the six years since its inception. MetLife's decision to reallocate MAL's surplus so that it could potentially withdraw capital from the subsidiary supports our view that management does not intend to invest heavily in the business. We expect MAL to write little new business.
Although MAL has some liabilities associated with several buy-outs of Irish pension schemes, the majority of the company's liabilities are U.K. annuities. We therefore consider the company as having low industry and country risk. Our view is supported by our positive opinion of the U.K.'s institutional framework and the industry's strong track record of minimizing asset-liability mismatches. We consider the sector to be highly competitive; nevertheless, we believe that life insurers in the U.K. will maintain moderate levels of
profitability.
The stable outlook reflects our view that MAL's financial profile will remain stable.
We could raise the ratings if:
-- Group management were to demonstrate MAL plays a more important part in group strategy; or
-- Our assessment of MAL's competitive position were to strengthen through increased new business activity, particularly with a less-narrow BRP.
Conversely, we might lower the ratings if:
-- We believed capital will decline due to higher-than-anticipated dividends; or
-- The company's liability profile is more volatile than expected. This might be due to significant reserve movements through changes in longevity assumptions.
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