MetLife Leads Busiest Day of Bond Sales Since March (Update1)

By Gabrielle Coppola and Andrew Frye
Bloomberg News
June 3, 2009

June 3 (Bloomberg) -- Insurers MetLife Inc. and Ameriprise Financial Inc. led the busiest day of corporate bond sales since March as companies take advantage of the lowest borrowing costs in almost 11 months.

MetLife, the biggest U.S. life insurer, raised $1.4 billion in a two-part sale through its MetLife Global Funding I unit after selling $1.25 billion of debt last week. Ameriprise, a Minneapolis-based wealth management and insurance company, sold $300 million of 10-year notes. The company sold $200 million of notes last week.

Insurance companies are leading the charge into open credit markets after being shut out late last year as mounting losses on corporate bonds and commercial-mortgage holdings eroded capital. MetLife Chief Financial Officer William Wheeler, speaking at a conference yesterday, said the credit crunch revealed that life insurers were too complacent about their access to funding from the markets.

"What we've all learned is that if you're a year away from a debt maturity, lock it in now," Wheeler said at the conference, hosted by Standard & Poor's in Brooklyn, New York. "A lot of insurance companies cut it way too close and almost got in a lot of trouble."

The average yield on insurance company bonds with investment-grade ratings relative to benchmark rates fell to a 2009 low of 600 basis points today, after reaching a yearly high of 957 basis points on March 25, according to Merrill Lynch & Co.'s U.S. Corporates, Insurance index. A basis point is 0.01 percentage point.

Help From Rally

Insurers' capital concerns eased in recent months as the stock and bond market rallies boosted their portfolios and brought back investors. MetLife sold short-term debt to the government to increase liquidity, Genworth Financial Inc. tapped its credit lines, while carriers including Prudential Financial Inc. applied for bailout funds from the U.S. Treasury's financial rescue program.

Insurance companies raised about $4 billion last month, compared with $1.8 billion in the first four months of 2009, according to data compiled by Bloomberg.

Insurers rattled by investment losses are tapping capital markets to prove their strength and untangle themselves from government restrictions, said Kevin Murphy, investment-grade team leader at Putnam Investments LLC in Boston.

Spreads Fall

"Names in banking, finance and insurance are doing everything they can to make the case," Murphy said today in a telephone interview. "You're addressing on the equity side that you've got the capital cushion to absorb anticipated losses, and being able to issue debt demonstrates that you're not going to have a liquidity crisis."

The average yield on investment-grade debt fell to 6.41 percent today, the lowest since July 15, according to Merrill's U.S. Corporate Master index. Yields on the debt relative to benchmark rates, or spreads, fell 6 basis points today to 365 basis points, the lowest since Sept. 12.

Dartmouth College, which sold $250 million of 10-year notes, and auto and home lender GMAC LLC are two of 15 borrowers that sold bonds today. Companies issued $12.7 billion of debt without government-guarantees, the most since March 17, when borrowers raised $14 billion. Including GMAC's government-backed sale, companies raised $17.2 billion today.

First for GMAC

GMAC sold $4.5 billion of fixed- and floating- rate notes that mature in 2012, Bloomberg data show. The debt is the first sold by the Detroit-based company to be backed by the Federal Deposit Insurance Corp.

Ameriprise's 10-year, 7.3 percent notes priced to yield 375 basis points more than similar-maturity Treasuries, Bloomberg data show. The notes are rated A3 by Moody's Investors Service and A by Standard & Poor's.

Proceeds will be used for general corporate purposes, which may include paying down senior debt maturing in November 2010, said Paul Johnson, a company spokesman.

"We think that the market conditions remain favorable and we're taking the opportunity to further strengthen our capital position," he said.

MetLife sold $1 billion of five-year, 5.125 percent notes that priced to yield 280 basis points more than Treasuries, and $400 million of two-year notes that float 190 basis points over the three-month London interbank offered rate, according to a person familiar with the offering.

Christopher Breslin, a spokesman for MetLife, declined to comment.

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