Manulife Financial Corporation (MFC - Free Report) announced the pricing of $500 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 2.484% and are scheduled to mature in 2027.
The company aims to deploy the net proceeds from the sale of the Notes for general corporate purposes, which may include future refinancing requirements.
The company issued senior notes amid a low interest rate environment to get hold of more funds and enhance financial flexibility without affecting its liquidity. As of Mar 31, 2020, Manulife had $27.1 billion liquidity.
As of Mar 31, 2020, total debt of the company was about $3.7 billion, up 8.1% from 2019 end. The debt-to-capital ratio on Mar 31, 2020 was 8.1, down 20 basis points from 2019 end and better than the industry average of 11.5. The debt level of the company has been stable over the last few years and thus its debt to capital has been improving. Nonetheless, the latest offering will increase the debt-to-capital ratio by 100 basis points.
The firm’s times interest earned ratio has been improving over the years. The improvement in this ratio indicates that the firm will be able to meet current obligations in the near future without any difficulties.
By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.
Recently, Radian Group Inc. (RDN - Free Report) and Alleghany Corporation (Y - Free Report) offered 6.625% $525 million senior unsecured notes and 3.625% $500 million senior unsecured notes, respectively to capitalize on the low interest rate environment.
Shares of this Zacks Rank #4 (Sell) life insurer have lost 34% in the past year compared with the industry’s decline of 26.1%.
Stocks That Warrant a Look
A better-ranked stock from the life insurance sector is American Equity Investment Life Holding Company (AEL - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Equity Investment surpassed estimates in each of the last four quarters, with the average positive surprise being 63.04%.
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