MetLife FSR under review after separation of US retail segment

AM Best has placed the A+ financial strength rating (FSR) of the primary life/health insurance subsidiaries of MetLife under review with developing implications.

Additionally, the rating firm has placed under review with developing implications the FSR of A (Excellent) of MetLife’s property/casualty companies, consisting of Metropolitan Property and Casualty Insurance Company, seven fully reinsured subsidiaries and a separately rated subsidiary, Metropolitan Group Property and Casualty Insurance Company (together referred to as MetLife Auto & Home).

The actions follow MetLife’s public announcement on Jan. 12, 2016 that it will pursue the separation of a substantial portion of its US retail segment and is evaluating structural alternatives for this separation.

These alternatives include a public offering of shares in an independent, publicly traded company, a spin-off or a sale.

MetLife is still in the beginning stages of this process and additional information will become available as the transaction unfolds, including details on both the corporate and capital structure of the two companies.

AM Best notes that the new retail focused company would maintain the more capital intensive lines of business, including variable annuities with living benefit riders and universal life with secondary guarantees, which would result in a significant amount of exposure to market volatility and interest rate risk. However, at this time the level of capitalisation for this company has not been set.

AM Best said it acknowledges that MetLife will maintain its industry leading position in the group insurance market and will continue to focus on growing its corporate benefit funding segment, which includes structured settlements and pension risk transfer business. The company will also focus on increasing its international presence in which it holds several market-leading positions in both mature and emerging markets.

The ratings will remain under review until AM Best receives more definitive direction from the management of MetLife on the final separation strategy to be pursued, as well as the ultimate capital structure and allocation between the organisations.