S&P Strips Mass Mutual of Its Triple-A Rating

Massachusetts Mutual Life Insurance Co., one of the best-capitalized U.S. life insurers going into last year’s market slide, lost its coveted triple-A financial-strength rating from Standard & Poor’s Ratings Services.

S&P on Wednesday cut its ratings on the insurer and its U.S. insurance units to double-A-plus, the second-highest on its scale. S&P said the economic downturn has weakened the insurer’s financial flexibility and the quality of its capital, a material portion of which is derived from the more-volatile value of its asset-management businesses. Those include OppenheimerFunds Inc., Babson Capital Management LLC and Baring Asset Management Ltd.

“MassMutual’s business profile and competitive advantages, though among the strongest in the industry, are more consistent with those of ‘AA+’ rated peers,” said S&P credit analyst Robert Hafner.

The ratings outlook is stable, S&P said, because of the company’s “sustainable competitive advantages and very strong capitalization.” The ratings had been put on watch for possible downgrade in June.

Massachusetts Mutual spokesman Mark Cybulski said the company was disappointed by the downgrade, but noted, “MassMutual maintains among the highest financial-strength ratings of any company in any industry.” He added: “Our fundamental business remains strong in this historically difficult economic environment.”

The company, a mutual owned by its policy holders, continues to hold triple-A status with Fitch Ratings and A.M. Best Co., while Moody’s Investors Service has its “Aa1” financial-strength rating, the second-highest possible, under review for possible downgrade.

In recent months, the major ratings firms have downgraded dozens of life insurers. Many insurers have been weakened by investment losses and some have had to boost reserves and capital to show regulators they can make good on stock-market-related investment-performance guarantees they sold on variable annuities.