Outperforming insurance index
MetLife’s shares have marginally outperformed the iShares Dow Jones US Select Life Insurance Index (IAK) marginally. However, when compared to the broader market index S&P 500, both the stock and the insurance index have underperformed.
Life insurers, which are included in the Financial Select Sector SPDR ETF (XLF), have underperformed the market due to negative news regarding macroeconomic situations, and low interest rates. This not only hurts an insurer’s earnings, but it also increases its insurance liabilities. We outlined this in our insurance industry overview, An investor’s guide to the insurance business.
A closer look at MetLife’s (MET) price-to-book value multiple shows that it is in the midrange of its historical valuation. Over the last four years, MetLife’s price has ranged between 0.5x–1.0x its book value per share, with a current price-to-book value multiple of around 0.8x.
Comparing with peers
In this section, we compare MetLife with its life insurance peers, like Prudential Financial (PRU), Manulife (MFC), and Principal Financial (PFG). MetLife’s stock is comparatively cheaper compared to its peers not only on a book value basis, but also on the basis of price-to-earnings ratio, despite its strong earnings profile, comfortable cash position, and successful delivery of strategy.
In the following article, we’ll look at how the Global Systemically Important Insurer designation impacts the company.