Recently, Reuters reported that
) has vended senior unsecured notes worth $750 million. The notes
bear an interest rate of 4.125% and are scheduled to mature in
February 15, 2042.
MetLife expects to utilize the funds raised from the issuance of
these notes for business operations and to retire senior notes
worth $750 million that are due to mature in August and November of
Additionally, the 30-year notes carry a rating of "a3" from
Moody's Investor Service of
) and "A-" from A.M. Best Co., Fitch Ratings and Standards &
Poor's (S&P). The outlook for all ratings remains stable.
Rating Agencies Approve New Debt
Earlier in May this year, S&P had upgraded its outlook on
MetLife's debt to stable from negative, while affirming all the
long-term counterparty credit ratings of the company and its
operating subsidiaries. The rating agency also upgraded the ratings
of MetLife's American Life Insurance Co.(ALICO) in Asia, which was
American International Group Inc.
) in November 2010. In the same month, Fitch had also affirmed its
rating on the company.
The ratings from all these agencies validate MetLife's solid
earnings growth and escalated its operational scale on the heels of
exceptional operating performance from its diversified business
basket and brand appreciation. Moreover, efficient management of
the company's investment portfolio and enterprise risk has helped
it secure competitive advantage in the market.
Despite the lingering concerns regarding the low interest rate
and economic volatility, MetLife has been successfully maintaining
acceptable risk-based adjusted capital (RBC) ratios. Further, the
latest notes sale is not expected to hamper the financial leverage
that stood at 27% at the end of June 2012, which is still higher
given the lower capital in 2012 compared with 2011, primarily led
by alterations in DAC accounting standards this year. Conversely,
the debt leverage is expected to improve to about 24% by the end of
2013, when MetLife will have paid off the debts that are scheduled
to mature next year.
Additionally, S&P anticipates MetLife to produce net
retained earnings of about $3.9 billion and $4.2 billion in 2012
and 2013, respectively. This estimate includes the remarketing and
settlement of equity units worth $1 billion, in both 2012 and 2013.
The rating agency estimates EBITDA in the band of $9-10 billion
with EBITDA fixed-charge coverage of 6.5x to 7x.
Meanwhile, Fitch elucidated the possibility of a rating upgrade
provided MetLife maintains the NAIC RBC ratio above 450%,
debt-equity ratio lower than 25%, interest coverage ratio is in the
band of 8x-10x and successfully integrate ALICO.
On the flip side, the ratings could be downgraded if NAIC RBC
ratio falls below 350%, debt-equity ratio more than 30% and
interest coverage ratio dips below 5x in future.
MetLife reported second-quarter 2012 operating earnings per
share of $1.33, smoothly outpacing both the Zacks Consensus
Estimate of $1.25 and year-ago quarter's earnings of $1.13.
Operating earnings escalated 18% year over year to $1.43 billion.
Total operating revenue for the reported quarter edged up 1% year
over year to $16.79 billion and also exceeded the Zacks Consensus
Estimate of $16.54 billion.
The upbeat results were primarily due to a robust earnings
growth across U.S., Asia and EMEA along with improved underwriting
results, higher net investment income, higher-than-expected
derivative gains as well as lower-than-expected operating expenses.
This was partially offset by lower-than-expected top-line growth
across the U.S. and EMEA, particularly led by low premiums' growth
and continued underperformance from variable annuities as well as
low interest rate environment.
We retain our long-term 'Neutral' recommendation on MetLife. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the stock over the near
AMER INTL GRP (AIG): Free Stock Analysis Report
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METLIFE INC (MET): Free Stock Analysis Report
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