Massachusetts Mutual Life Insurance Company has been given a debt rating (aa-) by A.M. Best Co., to the $400 million, 30-year surplus notes, which was issued by MassMutual, Springfield, MA. However, the present financial strength, debt & credit ratings of the issuer and its affiliates have remained unchanged. MassMutual would be utilizing the proceeds from the offering, for other general purposes, and will thereby strengthen the statutory capital position.
A.M. Best Co., states that this benefit may be offset by the additional costs that would be incurred to service new debt securities. A higher financial leverage will also result in a slight drag in the earnings of the group. However, MassMutual statutory financial leverage (12.7%) is well within the A.M. Best Co., guidelines for the company’s present ratings.
MassMutual is one of the topmost whole life insurance companies in the US and has an impressive portfolio of products as well as asset management services that it offers to the corporate sector and affluent individuals as well. The group derives it benefits from the whole life block as well as the universal and term life policies, which are basically sold via the agency force. Due to this, MassMutual has managed to retain a stable liability structure, which helps maintain its financial strength in the long term.
Despite the fact that the investment management capabilities of MassMutual are really strong, A.M. Best Co., continues to remain cautious due to the exposure the group has to the real estate markets. The exposure is roughly around 1.5 times the total-adjusted capital when it is combined with limited-partnership equity holdings (with underlying real estate assets), commercial & residential mortgaged-backed securities (exclusive of agency-issued securities), commercial mortgage loans etc. Although the commercial mortgage holdings at MassMutual is well diversified by the geographic location as well as the property type, A.M. Best Co., has noted that the portfolio has too much of exposure to properties, which have a high loan-to-value ratio that is even greater than 95% as well as a debt service coverage ratio, which is low (less than 1.0).
The ratings are determined using the Best Credit Rating method, as this is the principal methodology that is used. Non-Life Insurance Edition and Global Life provide a proper explanation of the rating process by A.M. Best and also highlight various rating criteria that are employed. Apart from this, there are also other additional criteria that are used for the rating process.
