MetLife is pursuing a sale of its property/casualty auto and home insurance business, according to a report by analysts following the company
Keefe, Bruyette & Woods (KBW) analysts, Ryan Krueger and Meyer Shields, said the insurer is looking at a sales price of between #3 billion and $4 billion, which they say is “reasonable for a personal lines business with a solid track record.”
“P&C has never seemed like a complete strategic fit despite MET’s worksite distribution efforts, and a $3-4b price would significantly exceed MET’s 6.5x multiple,” wrote he analysts.
MetLife Auto & Home writes about $3.7 billion in annual premiums through both independent agencies and worksite sales.
From 2015-2019 the property/casualty business generated an average operating ROE of 13% and a combined ratio of 97%, according to KBW.
Operating earnings were $344 million in 2018 and $249 million in 2019.
Krueger and Shields think “strategic buyers would be attracted to both the enhanced scale – which improves general economies of scale and also enhances the statistical credibility of pricing and underwriting analyses – and MET’s well-established worksite distribution channel, both of which point to already leading personal lines insurers as the most likely buyers.”
Among the carriers they think might be interested are Travelers, Hartford and Berkshire Hathaway as well as Liberty Mutual, Farmers, Nationwide, and American Family. Allstate and State Farm might have interest in the expansion opportunity but both are currently engaged in other acquisitions, they wrote.
On Sept. 17, MetLife, which is known for its life and health insurance and other benefits offerings, announced it had agreed to acquire vision care company Versant Health for approximately $1.675 billion in an all-cash transaction. Versant Health owns the brands Davis Vision and Superior Vision.
“This transaction furthers our goal of deploying capital to the highest-value opportunities,” said MetLife President and CEO Michel Khalaf.
In January, the insurer closed on the acquisition of PetFirst to give it access to the fast-growing pet insurance market.
At the KBW Virtual insurance Conference on Sept, 10 , CEP Khalaf said the company was continuing to look at its portfolio “through the lens of strategic fit” and to deploy capital to businesses that achieve or exceed a minimum risk adjusted hurdle rate.
Without specifying any particular units that might be under review, Khalaf added:
“So, you know, if there are businesses that are not you know achieving that, then – and where we don’t see sort of a path within a reasonable time frame to then – to them achieving that, then I would say all options are on the table and divestiture is one option. It’s not the only option but it’s certainly one option. So, you know, we’re going to continue our – to look at our portfolio from you know from that perspective. And you know undertake action that we feel is appropriate in this regard.”
Contacted for comment, MetLife issued a statement explaining that “as a matter of policy, we do not comment on market rumors or speculation.”
*This story ran previously in our sister publication Insurance Journal.
Source: KBW