Chart of the Day – Life Insurers Breakout Amid Higher Rates, $MET, $PRU

by Enis August 1, 2013 2:26 pm • Commentary

MET reported stronger than expected earnings and guidance on better performance in the U.S. and Japan units.  The stock is hitting a new bull market high today, up more than 5%.  It finally cleared the $50 level in a convincing fashion:

MET 7 year weekly chart, Courtesy of Bloomberg
MET 7 year weekly chart, Courtesy of Bloomberg

Interestingly, MET has actually been a laggard among the large life insurance names (with the exception of HIG, which is the weakest of the group).  PRU is the closest in size to MET in market cap terms (MET is $56 billion and PRU is $38 billion), and it broke out to new bull market highs back in May:

PRU 7 year weekly chart, Courtesy of Bloomberg
PRU 7 year weekly chart, Courtesy of Bloomberg

Since that break above $67, PRU is up about 20%, quite an extension in only 2 months.  The charts of LNC and PFG, two smaller life insurers, are basically identical to PRU, as both broke out in mid-2013 and have not looked back.

It’s not a coincidence that this breakout higher in the life insurers has coincided with rates moving higher.  Life insurers have long duration liabilities, and low long-term rates make it more difficult for life insurers to meet those liabilities with long duration assets.  Life insurance is one sector that is certainly rooting for higher rates.