- MetLife Inc., the largest U.S. life insurer by assets, said Wednesday it will cut an unspecified number of jobs, one day after it announced plans to raise capital in the middle of a global credit squeeze.
The company's shares plunged 13 per cent in morning trading.
The insurer, which has 49,000 employees around the world, according to Reuters data, said the layoffs would conclude this month.
The firm said Tuesday night it would sell 75 million common shares to supplement its capital position and be used for both general corporate purposes and potential strategic initiatives.
The share offering, expected to price Wednesday, was worth close to $2.76-billion (U.S.), based on the closing price of the stock on Tuesday on the New York Stock Exchange.
Insurers have been under pressure to keep solid capital positions in order to maintain their ratings as they have been hit by the worst global credit crisis since the Great Depression.
Keeping high ratings is key for insurers because lower ratings can mean higher costs and, in some cases, even a loss of business.
"The size and indicated uses of cash are to increase the capital position to a level to withstand extraordinarily severe credit/equity market scenarios, including further downturns, without triggering rating agency action," said Fox-Pitt analyst Mark Finkelstein in a research note.
MetLife also estimated its excess capital position to be more than $4-billion excluding the capital raise, and said sources of liquidity include cash and cash equivalents of about $21-billion as of Sept. 30, up from $14-billion as of June 30.
The insurer's chief financial officer, Bill Wheeler, said in a conference call with analysts that he believes the $4-billion cushion is adequate, prompting questions from analysts wanting to know whether the capital raise was intended to fund an acquisition.
"This is about more than just building a war chest for doing an M&A deal," Mr. Wheeler said.
Both Wheeler and Chief Executive C. Robert Henrikson declined to discuss possible targets or deal sizes.
"I think the market understands what the opportunities are for this company," said Wheeler. After further questions, he added: "There's no deal in the works."
He also noted that MetLife wants to be known by clients and investors for its "security and soundness" and the capital raise is intended to support that.
Earlier this week, Allianz SE, Europe's biggest insurer, said it would invest $2.5-billion in U.S. life and property insurer Hartford Financial Services Group Inc.
Last month, American International Group Inc., once the world's largest insurer, received a federal bailout after losses in its financial products unit drove it to the brink of collapse.
MetLife shares were down $4.83 to $32.04 on the New York Stock Exchange.
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