Yesterday, rating agency A.M. Best asserted the credit and
financial strength ratings (FSR) of
) and its subsidiaries, while maintaining a stable outlook over
all. This reflects the company's favorable operating mix and
balance sheet amid the low interest rate environment.
Accordingly, A.M. Best affirmed MetLife's debt ratings along
with the issuer credit rating (ICR) of "a-," while its life and
health insurance subsidiaries' ICR and FSR have been avowed at
"aa-" and "A+," respectively.
The ratings agency validates MetLife's strong brand name in
the global insurance industry, which is based on its attractive
product portfolio and disciplined underwriting approach. The
company has an extensive basket of products that suits the
consumers' needs in the current economic position.
Alongside, MetLife remains healthily diversified with an
expansive scale of distribution across the globe. Additionally,
the ALICO acquisition from
American International Group Inc.
) in November 2010 has strengthened its position in the rapidly
growing and opportunity-generating regions of Asia-Pacific.
Moreover, the company's ability to hedge and de-risk its
investments has helped it diminish the risks related to its
investment portfolio, particularly in the ongoing low interest
rate environment. MetLife now focuses on less capital intensive
and market sensitive products, which have been reducing its
earnings volatility. Meanwhile, the company has restricted its
expansion into variable annuity business in order to minimize its
exposure to volatility from interest rates and equity
As well, the company's improved financial leverage and
capitalization reflect its strong liquidity and ability to
eliminate debt from time to time, without seeking help from the
capital market. However, A.M. Best also elucidated the factors
that cause severe risk to MetLife's operating and financial
leverage. These include the company's higher underwriting
expenses, catastrophe losses, competitive pressure and its
inability to hike dividends and deploy capital efficiently, in
order to retain the shareholders' confidence.
MetLife has come a long way since the recent recession and we
believe that the company is poised to pace up its growth as the
economy rebounds in the intermediate term. If the refurbished
capital plan, which scheduled to be submitted by early January
2013, gets approval from the Federal Reserve, MetLife will be
able to deploy excess capital.
However, a rejection in the future could gravely raise the
risk of rating downgrades. Hence, we maintain a Neutral
recommendation on the stock with a Zacks Rank #3, which implies a
short-term Hold rating.
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METLIFE INC (MET): Free Stock Analysis Report
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