March 14, 2012 / 5:27 PM / 6 years ago

TEXT-Fitch affirms MassMutual ratings, outlook remains stable

March 14 - Fitch Ratings has affirmed all ratings on Massachusetts
Mutual Life Insurance Company (MassMutual) and its wholly owned domestic
insurance subsidiaries (see complete list below). The Rating Outlook is Stable.	
	
This action follows a periodic review of MassMutual's financial results. The
ratings and outlook are supported by MassMutual's large and stable block of
traditional life insurance, strong capital levels, solid competitive position in
several major business lines, high-quality investment portfolio, and moderate
financial leverage. Fitch also believes that MassMutual's operating earnings
have recovered since the financial crisis but are still vulnerable to economic
conditions.	
	
Fitch considers MassMutual's capital strong with significant financial
flexibility to maintain strength even under stressed economic conditions.
Consolidated statutory total adjusted capital (TAC) increased approximately 7%
in 2011 to $13.2 billion at year-end driven by operating earnings and improved
investment quality. NAIC risk-based capital ratio increased to 522% from 507%.	
	
A significant source of financial flexibility comes from the participating
nature of MassMutual's in-force whole life business as well as experience
pass-through features of other insurance products. However, Fitch believes the
quality of MassMutual's capital has lessened since the beginning of the
financial crisis as the company added surplus notes and benefited from
accounting changes that led to a write-up in the carrying value of asset
management subsidiaries as well as recognition of additional deferred tax
assets.	
	
Fitch also believes that while earnings have improved since the 2008 start of
the financial crisis they still remain vulnerable to economic and investment
market stress. Statutory net income decreased 23% in 2011 largely due to
increased variable annuity guarantee reserves caused by prolonged low interest
rates. This caused operating return (after dividends and taxes) on TAC to fall
in 2011 after the two years of improvement. Fitch recognizes that the negative
effects of 2011's increased variable annuity guarantee reserves were offset by
hedges for which accounting treatment dictates the benefits appear separately,
mostly in surplus through the unrealized gains and losses line. Operating
results are also reflective of the company's comparatively high level of
policyholder dividend payments.	
	
MassMutual has no long-term financial debt due until 2023, and its funding
agreement business appears substantially self-funded given its strong
asset/liability management program. MassMutual's financial leverage ratio and
total financing and commitment ratio for year-end 2011 are expected to remain
relatively modest. Surplus notes comprised 10% of TAC at year-end 2011 but the
January 2012 $400 million surplus note issue pushed the ratio to 13% on a pro
forma basis. However, the higher level is still within rating guidelines of 15%
for normal surplus note notching.	
	
The ratings on C.M. Life Insurance Company (CM Life) and MML Bay State Life
Insurance Company (MML Bay State), which are wholly owned subsidiaries of
MassMutual, are based on Fitch's view that these entities are important
operating companies within the MassMutual organization.	
	
MassMutual Global Funding, LLC is a limited liability company domiciled in the
Cayman Islands. MassMutual Global Funding II is a statutory trust domiciled in
the state of Delaware. The companies and trusts were established for the sole
purpose of issuing debt instruments secured by funding agreements issued by
MassMutual.	
	
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life
Insurance Company and its affiliates. MassMutual is headquartered in
Springfield, MA. Its affiliates include OppenheimerFunds, Inc.; Babson Capital
Management LLC; Baring Asset Management Limited; Cornerstone Real Estate
Advisers LLC; MML Investors Services, LLC., MassMutual International LLC and The
MassMutual Trust Company, FSB. The company had $443 billion in assets under
management as of Dec. 31, 2011.	
	
Key rating triggers for MassMutual ratings that could lead to an upgrade
include:	
	
--Sustained improvement in quality and stability of operating results,
investment performance and capital generation.	
	
Key rating triggers for MassMutual ratings that could lead to a downgrade
include:	
	
--Increased volatility in capital and earnings due to higher than expected
credit-related losses (particularly in commercial real-estate related
investments), adverse outcome to litigation or other unexpected developments.	
	
--NAIC risk-based capital ratio below 400%.	
	
--Surplus notes to TAC ratio above 15%.	
	
--A change in MassMutual's legal organizational structure (which Fitch considers
unlikely) or a significant change in the macro environment.	
	
Fitch affirms the following ratings with a Stable Outlook:	
	
Massachusetts Mutual Life Insurance Company	
--Insurer Financial Strength (IFS) at 'AA+';	
--Issuer Default Rating (IDR) at 'AA';	
--$250 million 7.625% surplus notes due Nov. 15, 2023 at 'AA-';	
--$100 million 7.5% surplus notes due March 1, 2024 at 'AA-';	
--$250 million 5.625% surplus notes due May 15, 2033 at 'AA-';	
--$750 million 8.875% surplus notes due June 1, 2039 at 'AA-';	
--$400 million 5.375% surplus notes due Dec. 1, 2041 at 'AA-';	
--Short-term IDR at 'F1+';	
--Commercial paper program at 'F1+'.	
	
C.M. Life Insurance Company	
MML Bay State Life Insurance Company	
--IFS at 'AA+'.	
	
MassMutual Global Funding, LLC	
MassMutual Global Funding II	
--Secured notes program at 'AA+'.	
	
	
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
	
Applicable Criteria and Related Research:	
--'Insurance Rating Methodology' (Sept. 22, 2011).	
	
Applicable Criteria and Related Research:	
Insurance Rating Methodology

Our Standards:The Thomson Reuters Trust Principles.
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