Standard & Poor’s today lowered its counterparty credit and financial strength ratings on Massachusetts Mutual Life Insurance and its U.S. insurance affiliates to AA+ from AAA, citing the company’s exposure to the relatively volatile value of its asset management subsidiaries.
While repeatedly noting the strength and stability of MassMutual’s business profile, S&P, in a news release, said the “quality” of the group’s capital is weakened by having roughly 30% of its capital base tied to the value of money management subsidiaries such as OppenheimerFunds, Babson Capital Management and Baring Asset Management.
“We view MassMutual’s quality of capital as very strong but weaker than our quantitative model indicates, which measures a modest redundancy of capital at the extremely strong ‘AAA’ confidence level,” according to the release.
In an interview, Robert A. Hafner, S&P’s primary credit analyst on the MassMutual announcement, said MassMutual’s ratings are a downgrade to “very strong” from “extremely strong,” partially because the group’s ability to rely on capital tied to its asset management affiliates could become severely constrained at times of unusual volatility.
However, the corresponding change in S&P’s outlook for the company, to stable from negative, implies that MassMutual has the strength to weather a difficult market environment over the next three to five years.
“While we are disappointed that our rating has been revised by Standard & Poor’s, it is important to note that MassMutual maintains among the highest financial strength ratings of any company in any industry,” MassMutual said in an e-mailed statement. “We do not expect Standard & Poor’s adjustment of MassMutual’s rating to impact our fundamental operational excellence or our unwavering commitment to current or future policy-holders.”