MetLife shares drop as S&P warns of downgrade
MetLife Inc
The shares were at their lowest since December, down $1.50 at $34.87 on the New York Stock Exchange, despite fourth-quarter operating earnings that beat Wall Street expectations by a penny late on Tuesday. [ID:nN0299864]
There is no certainty MetLife will reach a deal for AIG's American Life Insurance Company (ALICO) unit, Chief Executive Robert Henrikson said on a conference call Wednesday, adding it does not need an acquisition to meet its business objectives.
Management added on the call the company would not sell any current businesses to finance a possible deal, nor would it use capital in an off-shore reinsurance unit toward a deal.
Still, Standard & Poor's said later in the day it may cut its ratings on the company. The agency said it was concerned about the sheer size of ALICO, and the possibility that a purchase could hurt MetLife's financial condition and pose integration risks.
MetLife and AIG -- the giant insurer that was bailed out by the U.S. government -- were in talks on a deal that could value ALICO at between $14 billion and $15 billion, according to a source, Reuters reported last month.
MetLife did not discuss a price tag for ALICO, which sells life insurance and retirement products in 54 countries. The company has said in the past it aimed to expand internationally.
S&P said it could lower the ratings if, after the acquisition closes, financial metrics weaken substantially and we believe that other operational risks are not adequately addressed.
S&P's current counterparty rating on MetLife is A-minus, its seventh-highest investment grade, reflecting how well the company can meet financial obligations with customers, trading partners and others.
Keefe, Bruyette & Woods analysts wrote that MetLife's capital position likely affords them the possibility of funding part of an acquisition, perhaps $2-3 billion, from existing resources.
An ALICO purchase could ultimately add 25 cents in per-share earnings in the first year, the analysts added in the note to clients, published before the S&P report.
(Additional reporting by Dena Aubin; Editing by Derek Caney and Steve Orlofsky)
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