A.M. Best has assigned a debt rating of “bbb” to the $1.5 billion 5.25% fixed-to-floating rate non-cumulative preferred stock, Series C recently issued by MetLife, Inc. (MetLife) (New York, NY) [NYSE:MET]. The outlook assigned to the rating is stable.

Proceeds from the sale of the Series C preferred shares will be utilized primarily to fund the full purchase of MetLife’s existing 6.50% non-cumulative Series B preferred shares. The Series C preferred shares rank equally with MetLife’s Series A and Series B preferred shares and are perpetual, but the dividends are not cumulative or mandatory. The issuer is restricted in its ability to repay or repurchase the Series C preferred shares on or prior to Dec. 31, 2018, due to a replacement capital covenant, which will terminate on that date, for the benefit of the holders of MetLife’s 10.75% fixed-to-floating rate junior subordinated debentures due 2069. The Series C preferred shares are redeemable at MetLife’s option on or after June 15, 2020, or at any time prior to June 15, 2020, within 90 days of a “regulatory capital event.” A regulatory capital event encompasses certain changes in laws, rules or regulations implemented by the company’s capital regulator, currently the Federal Reserve Board, which currently maintains oversight of MetLife as a non-bank systemically important financial institution (SIFI).

A.M. Best notes that MetLife’s pro forma financial leverage is expected to remain in the 25% range in the near to medium term. Additionally, MetLife’s financial flexibility remains strong and interest coverage is expected to remain above five times.

MetLife’s ratings recognize its diverse business mix, favorable operating results, strong franchise, considerable scale and prominent market positions across several product lines. MetLife continues to generate consistent revenue and cash flows, and has reported growth in operating earnings across the majority of its core segments. Overall operating results improved in 2014 versus the prior period despite headwinds from low interest rates and increases in mortality and morbidity claims during the year. A.M. Best notes that MetLife’s earnings have benefited from higher net investment income and asset-based fee revenues driven by favorable equity markets.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Additional key criteria utilized include:

  • Analyzing Insurance Holding Company Liquidity
  • Equity Credit For Hybrid Securities
  • Insurance Holding Company and Debt Ratings

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