MetLife Still Trades at a Premium

MetLife, Inc. (MET - Analyst Report) is a leading provider of insurance and financial services to a broad spectrum of individual and institutional customers. The company's 4Q08 operating earnings came in at $0.19 per share, a penny ahead of our estimate and five pennies ahead of consensus.

Results benefited from top-line growth and favorable underwriting results, partly offset by a decline in equity markets and lower investment income. While we think MET should continue to benefit from its diversified business mix as well as its leading brand, higher losses in the investment portfolio and lower income from the variable annuity business will impact the results in the coming quarters. Recent rating downgrades have added to the challenges for the company.

Shares of MetLife currently trade at 0.78 times its 4Q08 reported book value of $27.33 per share, a 12% premium to the peer group median (same as our last report). Relative pricing looks stretched on a price-to-book basis, given an ROE that at par with the peer group median (versus 1% discount previously).

We are reiterating our Hold recommendation on the shares. Our six-month target price of $24.25 per share assumes a multiple of 0.66 times our estimated book value of $37.00 per share as of June 30, 2009 and equates to 6.5 times our estimated EPS for FY09.