A.M. Best Comments on Credit Ratings of Massachusetts Mutual Life Insurance Company Following Sale of OppenheimerFunds to Invesco
OLDWICK, N.J.--(BUSINESS WIRE)--Oct 18, 2018--A.M. Best has commented that the Credit Ratings (ratings) of Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA) remain unchanged following the Oct. 18, 2018, announcement that it has entered into an agreement to sell Oppenheimer Funds, Inc. (OppenheimerFunds) to Invesco. The Financial Strength Rating of A++ (Superior) and the Long-Term ICRs of “aa+” for MassMutual and its operating insurance subsidiaries also are unchanged following the announcement. Additionally, the Long-Term Issue Credit Ratings on MassMutual’s surplus notes of “aa-” and its notes issued under funding agreement-backed securities in MassMutual Global Funding, LLC and MassMutual Global Funding II of “aa+” remain unchanged. The outlooks of these ratings are stable.
Invesco has agreed to purchase OppenheimerFunds from MassMutual for $5.7 billion in exchange for the issuance of $4 billion in preferred stock to MassMutual with a coupon of 5.9% and a 21-year non-call provision and approximately $1.7 billion in common stock. Prospectively, MassMutual will have a 15.5% ownership stake, a seat on Invesco’s board and will become Invesco’s single largest institutional shareholder. The transaction is tax-deferred and it is anticipated that it will be granted equity accounting treatment and will be accretive to risk-adjusted capitalization with an increase in total statutory adjusted capital of approximately $4.0 billion, which A.M. Best views favorably. This transaction is expected to close in the second quarter of 2019.
The transaction is moderately negative from a near-term earnings perspective (incorporating transaction costs), but A.M. Best expects it to be accretive in the longer term. OppenheimerFunds’ operating income has been positive over the past several years, although results have faced some pressure from the secular trends occurring within the highly competitive global asset management marketplace. These trends include the shift from active to passive management, the need for technological investment in digitalization and improvement in the customer experience. The transaction effectively swaps operational control of OppenheimerFunds for a steady stream of dividend income, reduces the impact of equity market volatility on economic capital and eliminates MassMutual’s need for additional capital investment in OppenheimerFunds. The transaction improves Invesco’s scale and market rankings in global asset management and is complementary from a fund line-up perspective.
A.M. Best views the sale as having a neutral impact on MassMutual’s favorable business profile assessment. While the company will be less diversified in its asset management segment, the OppenheimerFunds sale will allow MassMutual to focus on core life insurance offerings, in which MassMutual maintains leading market positions in whole life, disability income and strong institutional capabilities within pension risk transfer, bank-owned life insurance and funding agreements. A.M. Best notes that MassMutual will continue to retain its Barings asset management subsidiary, which is focused on institutional asset management.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s web page. For additional information regarding the use and limitations of Credit Rating opinions, please view . For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view .
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KEYWORD: UNITED STATES EUROPE NORTH AMERICA MASSACHUSETTS NEW JERSEY
INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE INSURANCE
SOURCE: A.M. Best
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PUB: 10/18/2018 04:37 PM/DISC: 10/18/2018 04:37 PM