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How MetLife’s Valuation Compares

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Dec. 18 2017, Updated 7:30 a.m. ET

Lower valuation multiple

MetLife (MET) has a next-12-month price-to-earnings ratio of 11.3x, lower than peers’ average ratio of 15.1x. Peers (XLF) CNO Financial Group (CNO), Reinsurance Group of America (RGA), and Arch Capital Group (ACGL) have ratios of 15.5x, 14.8x, and 14.9x, respectively.

The spin-off of BrightHouse Financial (BHF) has led to substantial separation expenses, which could be the reason for MetLife’s discounted valuation. However, it may still have long-term potential thanks to its focus on rewarding shareholders.

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Hurricanes and book value per share

In its property and casualty business, MetLife witnessed pre-tax gross losses from Hurricanes Irma and Harvey of ~$65 million in 3Q17, and its book value per share fell 25% year-over-year to $51.83, mainly because of the BrightHouse Financial spin-off.

On October 24, 2017, MetLife declared a quarterly dividend of $0.40 per share, to be paid on December 13, 2017. Its quarterly dividends have been flat over the last few quarters. Whereas MetLife has a last-12-month price-to-book ratio of 0.99x, peers CNO Financial Group (CNO), Arch Capital Group (ACGL), and Reinsurance Group of America (RGA) have ratios of 0.87x, 1.4x, and 1.3x, respectively.

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