OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has commented that the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” of Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA) remain unchanged following today’s announcement that it has entered into an agreement to sell its retirement plan business to Empower Retirement. The FSR of A++ (Superior) and the Long-Term ICRs of “aa+” of MassMutual’s operating insurance subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company (both domiciled in Enfield, CT), 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 Credit Ratings (ratings) are stable. The Short-Term Issuer Credit Rating of AMB-1+ also remains unchanged.
The transaction is being structured as a reinsurance transaction with a ceding commission of $2.35 billion subject to regulatory approval with assets under management (AUM) of $167 billion with 2.5 million participants. The transaction is expected to reduce MassMutual’s exposure to equity and interest rate risk and will free up a moderate amount of statutory capital. MassMutual intends to deploy the proceeds to grow its core business lines.
AM Best expects the transaction to be moderately negative to earnings in the near term until MassMutual can successfully deploy the proceeds through organic or non-organic growth opportunities and divest itself of stranded costs. The transaction reflects MassMutual’s view that there is increasing competition in the retirement services marketplace, coupled with the need for technological investment in digitalization to improve the plan and participant experience. This segment requires significant scale and investment to garner operational efficiencies in a business line that faces declining margins, partially due to interest rates.
MassMutual’s business profile is increasingly focused on organic growth in its core lines, which includes whole life, disability income, institutional products and pension risk transfer. MassMutual plans to further expand its wealth management distribution capabilities while focusing on growth within insurance, asset management and institutional products. AM Best notes that the transaction offers potential cross-selling opportunities to Empower Retirement’s participant base through digital sales within Haven Life and voluntary insurance and lifetime income products.
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