OLDWICK, N.J.–(BUSINESS WIRE)–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
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
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 Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
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