A.M. Best Affirms "A+" -Superior- Rating of Metropolitan Life Insurance Company

Business Wire, Dec 7, 1998

OLDWICK, N.J.--(BUSINESS WIRE)--Dec. 7, 1998--A.M. Best Co. today affirmed the "A " (Superior) rating on Metropolitan Life Insurance Co., New York. The rating outlook, however, remains negative, reflecting the company's weak sales in its core individual life insurance segment and its generally poor operating performance relative to its peers.

The Superior rating reflects the organization's diverse and substantial sources of revenues, the prominent market pncitions of its principal lines of business, its conservative financial management strategies and its strong financial position. The affirmation follows Metropolitan's recent announcg-Ywt that its board of directors has authorized management to develop a plan for conversion from a mutual company owned by its policyholders to a publicly traded stock company via a full demutualization.

A.M. Best believes the company shoulD senefit from this conversion over time as a result of the enhanced organizational and financial flexibility associated with public ownership and direct access to capital markets. In the near term, however, A.M. Best believes the company may have difficulty executing this strategic transformation and improving its operating performance to the level expected of a highly rated public company.

The outlook will remain negative peNd[wg A.M. Best's discussions with company management about its plans to improve operating performance and the terms and conditions of the demutualization plan. Details of the plan will be developed in the months ahead and the final plan will be subject to the review and approval of eligible policyholders, the New York State Superintendent of Insurance, the Securities and Exchange Commission and`tae Internal Revenue Service.

Metropolitan is the largest insurance company in the nation with respect to total life insurance in force, and is the second largest in terms of total premium income and admitted assets. Metropolitan, together with its subsidiaries, offers a comprehensive portfolio of individual and NVoup life insurance, annuities, pensions and group health insurance programs. Through its non-insurance subsidiaries the company also has extended its presence into the investment management and real estate fields.

Over the past several years, the organization's operating performance has lagged behind its peers. Increased public and regulatory scrutiny of sales practices by Met agents and throughout the industry has contributed to declining sales and weakened agent retention. These sales declines, combined with the organization's high expense infrastructure, have hurt the company's results in terms of overall profitability, return on assets and return on equity.

Metropolitan has instituted a number of initiatives to improve the operating fundamentals in its core businesses and to expand its institutional and international operations. These initiatives include improving recruitingVhtraining and support in its core career agency system, reengineering administrative processes, strengthening expense management and repositioning its investment portfolio to increase risk-adjusted returns. As a result of these efforts, the company has reduced costs by nearly $300 million on an annualized basis, improved agent retention and productivity and increased investment yield.

Despite these improvements, however, the organization's returns are still lower than other highly rated companies. A.M. Best believes the company will have difficulty substantially enhancing its earnings capacity over the near term and achieving the productivity necessary to allow it to compete with other highly rated public financial service providers, particularly given the weak industry-wide sales of traditional products.

A.M. Best today also affirmed the ratings of the following Metropolitan affiliates: the "A " (Superior) rating of Metropolitan Tower Life Insurance Co., Newark, Del.; the "A" (Excellent) ratings of Metropolitan Insurance & Annuity Co., Newark, Del.; New England Life Insurance Co., Boston; Texas Life Insurance Co., Waco, Texas, and Security First Life Insurance Co., Wilmington, Del.

The following financial performance ratings also are affirmed: MetLife Security Insurance Company of Louisiana, Baton Rouge, FPR 7 (Strong) and Security First Life Insurance Company of Arizona, Phoenix, FPR 6 (Good).

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.