Earlier this week,
) priced its long-term debentures worth $1.0 billion that are
scheduled for remarketing and settlement next week.
Previously, these senior debentures were issued in Nov 2010,
and comprised 40 million common equity shares of the company
issued in connection with the financing of the acquisition of
American Life Insurance Co. (ALICO) and Delaware American Life
Presently, these debentures are issued at an interest rate of
4.368% and are dated to mature on Sep 15, 2023. The company
expects to distribute the proceeds from the debenture sale to the
common equity holders against the prior stock purchase
Meanwhile, MetLife has appointed
Credit Suisse AG
HSBC Holdings Plc
Deutsche Bank AG
) as the joint book-running managers for the sale.
Further, the above-mentioned debentures are rated "A3" and
"A-" from Moody's Investor Service and Fitch Ratings,
respectively. However, Moody's casted a negative outlook on this
long-term debt, while Fitch affirmed its stable stance.
Both ratings agencies remain confident of MetLife's capital
flexibility, earnings growth potential on the heels of
diversified business basket, large scale of operations and brand
appreciation. However, Moody's is wary of the pace of growth,
which is likely to pose a sluggish trend given the low interest
rate environment across developed and emerging economies.
Exposure to variable annuities and spread business further add
to the woes. Nonetheless, since last year, MetLife has been
strategically shifting toward potential opportunities in the
emerging markets and employee benefit products, while driving
away from capital-intensive and spread-dependent products.
MetLife's financial leverage stood at 28% at the end of Jun
2013, which the ratings agencies believe should remain within
25%. Moreover, NAIC risk-based capital ratio that was 420% at the
end of Jun 2013 should likely be around 450%.
While Fitch expects MetLife's interest coverage of about 8x
for 2013, Moody's expect the company to maintain an over 8%
return on capital, without depending on variable investment
income, for a possible upgrade. Overall, MetLife has the
potential to outperform the peer group in future.
While MetLife carries a Zacks Rank #3 (Hold), other
outperformers in the insurance sector include
EMC Insurance Group Inc.
Global Indemnity Plc
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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