MetLife's (MET) Financial Integrity Reiterated by A.M. Best - Analyst Blog

Ratings agency A.M. Best has reaffirmed the credit and financial strength ratings (FSR) of MetLife Inc. (MET) and its subsidiaries, while retaining a stable outlook over all. This reflects the company's improving operating leverage and secure balance sheet amid the low interest rate environment and stiff competition.

Accordingly, A.M. Best asserted MetLife's debt ratings along with the issuer credit rating (ICR) of “a-”. Its life and health insurance subsidiaries' ICR and FSR were avowed at “aa-” and “A+”, respectively.

Additionally, an ICR and FSR of “a+” and “A”, respectively, were maintained on MetLife's property-casualty wings comprising Metropolitan Property and Casualty Insurance Co., seven fully-reinsured subsidiaries, along with MetLife Auto & Home (includes Metropolitan Group Property and Casualty Insurance Co.). Previously, A.M. Best had affirmed MetLife's credibility in Nov 2013.

Rationale

MetLife's long-term growth strategy of expanding business in emerging nations and reducing risks by divesting floundering assets have been commended by A.M. Best. Measured sales of variable annuities and termination of universal life with secondary guarantees sales, as well as astute hedging practices to counter volatile interest rates, foreign exchange and equity markets further reflect the company's prudent enterprise risk management competencies and a solid investment portfolio at Sep 2014-end.

Moreover, despite heavy investments in acquisitions (ALICO in 2010 and Provida in 2013) and network expansion and business-building in emerging markets, MetLife has been able to improve debt leverage and interest coverage ratios through expense reduction initiatives. The improvements are based on fundamental growth that has strengthened revenues, earnings, cash flow and liquidity. The acquisitions have also been accretive to MetLife's business profile, brand and market position.

Nevertheless, MetLife's diversified product portfolio mix and above-average risk appetite are partially offset by higher underwriting leverage, catastrophe losses and exposure to real estate-linked assets. Moreover, the company's risk-adjusted capitalization is currently lower than the peer group. While risks may pose threat to liquidity, MetLife has the potential to boost operating leverage and shareholder return in the future.

Zacks Rank

Currently, MetLife carries a Zacks Rank #3 (Hold). Better-ranked insurers like American International Group Inc. (AIG), Cigna Corp. (CI) and Assurant Inc. (AIZ) are also worth considering.

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