NEW YORK (Bloomberg) — MetLife Inc., the biggest US life insurer, may have its credit ratings cut by Standard & Poor's if the company buys a non-US unit from American International Group Inc.

"The potential acquisition could have a material adverse impact on MetLife's financial metrics, such as capitalisation," the ratings company said yesterday in a statement. S&P placed New York-based MetLife's ratings on "CreditWatch with negative implications".

MetLife, which reported its first profit in a year in the fourth quarter, said late on Tuesday it is in talks with AIG to buy American International Life Insurance Co. to expand in 50 countries. A deal may cost MetLife about $15 billion, a person with knowledge of the matter said last month.

"We believe that MetLife's capitalisation and financial flexibility are below expectations for the rating," S&P said of the company's A- long-term counterparty credit grade, which was downgraded from A a year ago. "We could lower the ratings if, after the acquisition closes, financial metrics weaken substantially and we believe that other operational risks are not adequately addressed."

MetLife fell $1.50, or 4.1 percent, to $34.87 at 2.18 p.m. in New York Stock Exchange composite trading.

"It is not uncommon for rating agencies to make this kind of ratings outlook change when a company is considering a significant potential acquisition," Christopher Breslin, a spokesman for MetLife, said in an e-mailed statement.

MetLife chief executive officer Robert Henrikson, who shunned government aid amid losses last year, is seeking to expand after stock and bond rallies boosted the firm's portfolio. MetLife said there is no guarantee an agreement will be reached.

Any merger or acquisition "would be accretive and financially attractive to shareholders", Henrikson told analysts yesterday on a conference call discussing fourth-quarter results. "MetLife does not need to enter into any M&A transaction to meet our business objectives."

MetLife's investment portfolio, which includes about $50 billion of commercial mortgage holdings, has weighed on its credit grades. Fitch Ratings downgraded MetLife on February 1 on the prospect of investment declines. MetLife probably will report $2.2 billion to $2.6 billion in investment losses in the five quarters ending in December 2010, Fitch said.

US life insurers may face $15 billion in additional losses on investments in commercial real estate, mostly in the next two years, Fitch said last month. Losses on investments in apartment buildings, offices, shopping malls and other commercial real estate will begin to increase in the next six months to a year as rents decline and vacancies increase, Fitch Senior Director Andrew Davidson said in November.