“We are affirming our 'A-' counterparty credit rating on MetLife Inc. and our 'AA-' counterparty credit and financial strength ratings on its core operating companies,” a research note states.
MetLife raised capital this week, and it now has proceeds of more than $3.6 billion from its common equity offering and $3 billion from its senior unsecured debt offerings on hand to fund its acquisition of AIG's international life insurance subsidiary, American Life Insurance Co. (Alico). Despite expressing reservations over the operational and integration risks associated with the acquisition, S&P says it views MetLife's agreement with AIG to acquire Alico as favorable to MetLife's business profile.
“We believe this capital raise removes a significant hurdle that MetLife faced in its acquisition of Alico, and we expect that the company will complete the transaction in the fourth quarter of 2010,” S&P states. “We recognize the value of global diversification that the Alico organization will contribute to MetLife prospectively, with key market positions in Japan and Eastern European countries that complement MetLife's current international footprint. Alico will contribute a higher-margin, lower-risk business profile to MetLife. However, Alico's size points to significant execution risks, in our opinion.”
The rating affirmations reflect the greater-than-planned equity raise as well as management's commitment to retain earnings at the operating companies, says S&P credit analyst Shellie Stoddard. “The affirmations also reflect our view that MetLife has improved its balance of statutory retained earnings and cash reserves to satisfy holding company obligations,” Stoddard says.
Elsewhere, Moody's rated MetLife's senior notes at A3, with a negative outlook.
“The debt and cash portions of the financing for Alico are in line with our rating expectations,” Moody’s notes. “MetLife's ratings are based the company's strong brand recognition, significant operating scale with leading market positions in both the
individual and group life businesses, diversified product and distribution capabilities, and frequent and reliable access to various capital markets—all of which provide the company with distinctive competitive advantages.
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access