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Fitch Rates Brighthouse Holding's Preferred Securities 'BBB-(EXP)'
June 20, 2017 / 9:11 PM / 3 months ago

Fitch Rates Brighthouse Holding's Preferred Securities 'BBB-(EXP)'

(The following statement was released by the rating agency) CHICAGO, June 20 (Fitch) Fitch Ratings has assigned an expected rating of 'BBB-(EXP)' to Brighthouse Holdings, LLC's (BHI) proposed issuance of approximately $50 million of fixed-rate cumulative perpetual preferred securities. Fitch also assigned a Long-Term Issuer Default rating of 'BBB+' to BHI, reflecting the legal transference of Brighthouse Life Insurance, New England Life Insurance Company and Brighthouse Life Insurance of NY under BHI. Fitch previously had an expected rating of 'BBB+(EXP)' on BHI pending the transfer. The expected rating has been set two notches down from BHI's IDR to reflect a standard assumption of "poor" recoveries for preferred securities in a default, with no additional notching for non-performance risk. Fitch views non-performance risk as "minimal." The lack of any additional notching is due primarily to the immaterial amount of proposed preferred securities relative to debt securities outstanding at upstream holding company Brighthouse Financial, Inc. (BHF), which Fitch believes makes risk of a coupon deferral highly unlikely. BHI will receive no proceeds from the issuance, as the securities are being sold by BHI's current parent, MetLife. KEY RATING DRIVERS Brighthouse's ratings continue to reflect the company's very strong statutory capitalization, significant operating scale, and strong risk-management capabilities. The business that will be contained within Brighthouse represents approximately 25% of MetLife's current total assets, which places Brighthouse as a top-12 U.S. life insurer on a standalone basis. The ratings also consider the company's above-average exposure to market-sensitive variable annuity and universal life with secondary guarantee businesses, which could have a negative impact on risk-based capitalization and earnings in an adverse market scenario. Fitch believes that further seasoning as a stand-alone company while maintaining a strong capitalization profile would ultimately reflect positively on the company's credit profile. RATING SENSITIVITIES The ratings assume a generally uneventful execution of Brighthouse's legal separation from MetLife. Significant adverse developments related to the separation could have negative implications for the ratings. In the near term, a significant decline in management's strategic target for statutory capital backing the variable annuity business at separation could lead to a downgrade. Longer-term, Fitch will apply its Prism capital model to Brighthouse when sufficient information becomes available, which is likely to be in 2017. A Prism capital score below 'Strong' could cause Fitch to reassess its view of Brighthouse's capital strength, which supports the rating. Additional downgrade sensitivities include a financial leverage ratio exceeding 28%, or a significant deterioration in profitability. The primary upgrade sensitivity would include establishment of a track record of strong operating performance, risk management and reasonable stability in capitalization following the company's separation from MetLife. FULL LIST OF RATING ACTIONS Fitch has assigned the following ratings: Brighthouse Holdings, LLC --Perpetual preferred securities on proposed issuance: 'BBB-(EXP)'. --IDR of 'BBB+'. Contact: Primary Analyst Bradley Ellis, CFA Director +1-312-368-2089 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Keith M. Buckley, CFA Managing Director +1-312-368-3211 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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